In my line of business, January is the time of year when the phones start ringing off the hook with concerned people asking, “What can I deduct on my tax return this year?” or “Will the new tax laws affect my taxes this year?” or “My deduction statements haven’t arrived yet, what should I do?”
These questions are answered in each year’s mission to educate people on what they need to know about taxes, and this year is no different. Filing the 2012 income tax return has created tax-induced anxiety for some people due to the ongoing political discussions about the “Tax Cliff” and our economic situation.
However, there is no need to panic. Planning is one of the best remedies to ensure a smooth tax filing experience. To help you with that, this article provides information to be used as a guide during the 2013 tax season.
Your tax return may be bigger than you think.
The American Taxpayer Relief Act of 2012 follows on from new legislation Obama signed into law in January and offers “forbearance” provisions that extend various tax cuts that were due to expire in 2011 until December 2012 (meaning you can keep more than money you have). you work so hard for.)
Tax Deductions 101
About two-thirds of taxpayers choose to use the standard deduction method instead of itemizing. Although itemizing may be more work up front, if you own a home, have a child/children, donated large portions to charity, etc., you could lose some of your money if you don’t itemize your deductions. I’ll save the intricacies of this topic for another article and just say that some deductions are only available if you choose to itemize. Visiting the IRS website at http://www.irs.gov or speaking with a licensed tax professional, such as an enrolled agent or CPA, will provide you with the in-depth knowledge you are looking for when filing your return. In the meantime, I’ve provided some general examples.
• Medical Expenses – Are your total medical expenses equal to more than 7.5% (this number will increase to 10% in 2013) of your adjusted gross income? If so, then this qualifies as a valid deduction.
• Business-Related Expenses: Job search expenses, ie travel interviews, resume printing, and job relocation of at least 50 miles, are all deductible. Are you an independent worker? If so, you can also deduct expenses related to a home office and other business purchases.
• Mortgage Expenses: Points paid on your home mortgage may be deductible. Even mortgage refinancing expenses can be deducted.
• Charitable donations: Giving money and other items of value to charity is deductible. It’s also worth taking a look at gas mileage and other expenses associated with a volunteer activity for possible deductions.
• Higher Education: The IRS limits taxpayers to one tax deduction per filing. Eligibility for higher education tax deductions depends on your income and marital status.
Late declarations of deductions
Depending on how elaborate your financial situation is, you may receive some forms after the April filing deadline. However, if you plan ahead and file an extension, the wait will be a little easier. I have listed some of the forms that are known culprits for being late.
• Form 5498 (IRA Contribution Form)
• Form 5498-ESA (contributions to Coverdell, formerly known as the Education IRA)
• Schedule K-1 (if you have received compensation from an estate, trust, partnership, or S corporation)
These are just a few guidelines to help resolve questions related to filing your 2012 income tax return. Consult your enrolled agent or CPA for a smoother, more personalized tax filing experience.
