DETROIT – Filing your taxes can be time-consuming and confusing. For just those reasons alone, some people tend to put it off the last minute.
That’s why Help Me Hank held a “Tax Help 4 You” Phone Bank, answering viewers tax-related questions.
Experts from the Michigan Association of Certified Public Accountants are in the thick of tax season helping everyone from individuals to businesses file returns.
CPAs sat for hours taking your calls about any questions you had regarding filing your taxes.
Help Me Hank and the Consumer team would like to thank the following CPAs for their help:
- Robyn Fuller - J&F Advisors
- Ashley Johnson - J&F Advisors
- Jamie Lopiccolo - Capocore Professional Advisors
- Regina Nock - Nock Accounting & Tax, PLC
- George Smith – AHP
- Michael Taylor – Heemer Klein & Company
- Alan M. Gallatin – Baker Tilly Virchow Krause, LLP
Thank you to the Michigan Association of Certified Public Accountants and Sabo PR for helping assemble our team of CPAs.
Tax tips to help you prepare
1. Get organized
If you haven’t been doing this all year, start now! Have a folder or file box where you place all tax-related documents and receipts throughout the year. Whether you’re using a tax professional or an online software, you can sit down and everything all in one place.
2. Report all your income
It’s easy to forget something small, but it can cost you. If you have a side gig, like driving for a service or selling items online, you need to include this.
Many sources of income will send you end-of-year documents, (I.e. W-2 form, 1099 forms, etc.) from your bank or brokerage detailing income from sources such as dividends or interest. That information also makes its way to the Internal Revenue Service, which is expecting you to report it.
For less-formal income you receive, it may be your responsibility to keep track of it and ensure that you have funds on hand to pay your tax bill in April. People who earn significant money on the side, may need to pay quarterly estimated taxes to the government in installments as well.
3. Keep up with changes to tax laws
The Tax Cuts and Jobs Act of 2017 ushered in lots of change, such as doubling the standard deduction and reducing various tax rates -- rules that are in effect now, for your 2019 tax return that you’ll prepare in 2020 and for future years. Some of the biggest changes: Alimony payments from divorce or separation agreements made or changed in 2019 or later will not be deductible and the penalty if you don’t have health insurance (and didn’t receive an exemption) has been eliminated. Finally, the threshold for deducting qualifying medical and dental expenses has risen from 7.5% of your adjusted gross income (AGI) to 10%. This makes it harder to deduct those expenses. So, if your AGI is $60,000, you could only deduct those qualifying expenses that exceed $6,000. Remember, the standard deduction is now much higher than it was in recent years, so many more people should simply take that instead of itemizing.
4. Consider “bunching” deductions
The Tax Cuts and Jobs Act, which took effect for the 2018 tax year, increased the amount of the standard deduction. For individuals: $6,500 to $12,000. For heads of households: $9,550 to $18,000. For married couple filing jointly: $13,000 to $24,000. Those who don’t have enough deductions to exceed that threshold take the standard deduction instead.
Experts recommend using the bunching method to surpass the thresholds, if possible. Bunching is a method where you time expenses by pushing deductible expenses into one calendar year. This can be achieved by moving forward certain deductions this year, like charitable contributions or prepaying January’s mortgage payment.
5. Max out your retirement plan contributions
Some experts say maxing out your retirement plan reduces your taxable income, which will reduce your tax bill.
If you can’t afford the maximum amounts, you should try to contribute at least the amount that will be matched by employer contributions. Think of the employer match as an immediate return on your money — all of the funds are tax-deferred and grow tax-free.
6. Take advantage of annual exclusion gifts
The maximum amount of gift tax exemption is $15,000. This means you can give up to that amount to a family member without having to pay a gift tax. Parents can take advantage of this by gifting their children $15,000 into a trust or a 529 plan, which is a tax-sheltered plan for college expenses.
7. Do some charitable giving
Charitable giving isn’t just about cash contributions; you can also donate items to charities and write their market values off as an itemized deduction on your taxes. Depending on the charity, you can donate things like clothing, furniture, electronics, etc.
According to the IRS, charitable contributions to private organizations are limited to 30% of your adjusted gross income; public charity gifts are limited to 50 percent of AGI.
They must be donated by the close of the tax year and you must have a receipt stating you donated them. Keep in mind the bunching method described above because unless you can exceed the new standard deduction thresholds, there’s no deduction for charitable contributions.
8. Fund a health savings account
Tax experts say as a high-deductible health plan to do this.
Health savings account contributions can reduce your income eligible for taxation and help you plan for future medical costs. If you’re single, you can contribute up to $3,500. The limit goes to $7,000 for couples and families. You can add an extra $1,000, if you’re 55 or older.
9. Small Businesses
Our tax experts had plenty of advice for business owners, like taking advantage of specific tax deductions.
10. Protect yourself from fraud
Whenever you’re filing documents with sensitive information like your Social Security number, it’s imperative to take the necessary precautions to prevent your data from being compromised. Filing taxes should be done directly on the IRS website or that of a trusted tax preparer. Additionally, be cautious about giving your personal information to a third-party platform. Setting up direct deposit with the IRS for your refund is wise, and if you owe money, be sure to send it through IRS Direct Pay.