Many taxpayers dread the April tax deadline, but there are ways to make filing your return easier. The Oklahoma Society of Certified Public Accountants (OSCPA) offers some timely tips to help you get started.
- Get organized. By the end of January, you should have received tax forms from the organizations that paid you compensation last year. Even if you’re not planning to get started on your tax return immediately, open a file now and start storing these forms, as well as any other relevant documents related to income, deductible expenses or other tax considerations. You’ll be happy to have this information at your fingertips when you need it. Be sure to pull out last year’s tax return, as well, in case you need any details from it or want to see how recent changes in tax law have affected your tax or financial situation.
- Document your deductions. Throughout the year, it’s a good idea to keep records of deductible expenses, but be aware that the new tax law may have an impact on which deductions you can take. For most taxpayers, the standard deduction nearly doubled to $12,000 in 2018 for individuals and $24,000 for couples, so many taxpayers may find they no longer need to itemize deductions. As a result, those taxpayers will not need to document related expenses. If you’re not certain, based on the amount of your deductions last year, whether you’ll need to itemize or not, be sure to hold on to your receipts until you’re ready to file your return this year. You may need the record for state or local income tax purposes, as some federal deductions that were restricted – such as real estate taxes – can be taken in higher levels at the state level. This means that some people may want to take advantage of taking the standard Federal income tax deduction and itemizing in their state (which is allowed in some states). Your CPA can offer advice on whether to itemize and which deductions you qualify for.
- Review your retirement contributions. Tax time is a good time to review your financial plan, including your retirement strategy. Particularly, if you’re not taking full advantage of an employer match for your contributions to an employer-sponsored pension plan, now’s the time to reconsider that decision. The money your company chips in to your account is like a free bonus that will only grow over the years. In addition, the earlier you start saving in an individual tax-advantaged retirement account, such as an IRA, the more time your money will have to accumulate. Need some advice on retirement planning? Remember that tax filing time is a good point to talk to your CPA about setting and reaching your retirement goals.
- Consider your goals for 2019 and beyond. Your tax return offers a good snapshot of where you stand financially. It can help you understand if your monthly budgeting is realistic, if you’re saving enough and if you’re taking advantage of all your tax-saving opportunities. Take some time now to think about your own financial goals, such as paying down debt or saving for a home, children’s education or retirement. Consider which ones are most important to you, then use the information you gather for your tax return to decide whether you’re on track to meet your goals. If not, you can make some adjustments either in the expected timing of your objectives or in your current spending or saving habits.
- Be prepared for changes in business taxes. The new tax law made some meaningful changes for small business owners and many independent contractors. They include a lowering of the corporate tax rate, a large deduction for small pass-through organizations, elimination of the corporate AMT, higher depreciation deductions and tougher requirements for some business deductions. Ask your CPA for more details.
In light of the many changes made by the Tax Cuts and Jobs Act last year, this is an especially good time to be prepared to reexamine your tax planning, your withholding and your short- and long-term goals. Your CPA can help answer your financial questions and help use your tax return to create a financial plan. In Oklahoma, you can get a free CPA referral and free 30-minuted consultation from www.FindYourCPA.com. For more money tips, visit www.KnowWhatCounts.org, like Know What Counts on Facebook, and follow Know What Counts on Twitter.With more than 6,500 members in public practice, industry, government and education, the OSCPA is Oklahoma's only statewide professional association of CPAs. Since 1918, the organization has continued to provide professional education, conduct quality reviews and promote and maintain high standards of integrity and competence within the accounting profession. The Money Management (Dollars & Sense) columns are a joint effort of the AICPA and the Oklahoma Society of CPAs, as part of the profession’s nationwide 360 Degrees of Financial Literacy program.