Normally, tax-filing season goes relatively smoothly for me, with the same clients procrastinating and missing the same items, year after year. But 2013 was quite different: I had some last-minute filers inform me right before the deadline that they had abandoned or sold several properties in 2012.
I had less than two weeks to get adequate data before the final filing deadline. Because there was no guarantee that we had all of the details we needed, I had to overestimate their gains on the properties until I could get better information.
Tax tips for the 2014 tax-filing season
Tell your tax professional about major financial transactions. If you were involved in any major financial transactions in 2013, tell your tax professional now—don’t wait until the last minute. (After all, you want to end up paying the lowest taxes possible, right?)
If you ask your tax pro now about the information and documents needed to correctly prepare your tax return, you will have plenty of time to dig up the paperwork. This will also give your tax pro time to research any unusual issues.
Make sure your information is up to date. If you have moved during the year, you might not get all your W-2s, 1099s, or other tax paperwork in time. Make sure you file a change of address with:
- Your prior employers
- Banks, brokerages, and financial institutions
- Other investments, such as partnerships, IRAs, and pensions
- Clients and others who have paid you money during the year
- The IRS (using Form 8822) and your state
Gather records of charitable contributions. Contact the religious and other organizations to which you’ve made donations to get written receipts for all of your charitable contributions.
According to the Internal Revenue Code, if you don’t have receipts for donations of $250 or more before you file your tax return, you won’t get to deduct your contribution.
Catch up on your business bookkeeping. This is especially important if your business is a C corporation or S corporation.
If you have profits, you should have been paying yourself a reasonable wage and not simply drawing money from an account. Get your bookkeeping done now and you can issue a payroll check in the last week of December to correct this oversight. The IRS is actively auditing profitable corporations (C or S) that don’t show officer compensation on the first page of Form 1120 or 1120S.
Update your withholding before the year ends. This is of particular importance if you have a profitable business on the side and have not made any estimated tax payments. Paying your business taxes via withholding will eliminate your late payment penalties.
Review last year’s tax return. What kinds of deductions you were able to use? Update this year’s records so that you can maximize those same deductions.
Ensure that identification is up to date. Make sure that you have Social Security numbers or individual taxpayer identification numbers (ITINs) for every potential dependent in your household. If not, get them now so you have them in time to file by April.
These are just a few tips that can help you prepare for the tax-filing season. Watch for more in the weeks to come!
Eva Rosenberg, EA is the publisher of TaxMama.com, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.