Why Talk About Taxes Now?

Why Talk About Taxes Now?

By Beth B. Burgess, CPA

With summer upon us, most people aren’t thinking about their income taxes. As a matter of fact, most people want to think about taxes as much as they want to have a voluntary root canal. And actually, the root canal may place first since the person is usually sedated for that procedure and I can’t provide that convenience along with the delivery of an income tax return. So, that leaves me with a slight disadvantage toward keeping my clients and friends pumped up about taxes and accounting issues.

With another tax season behind us, it always pays to plan ahead for next year. This year, I had an unusually large number of clients who were “unprepared” for tax season and everything that I would need to complete their return. And as most everyone has heard, we’ve got a number of changes for 2009 that you may need to plan for.

Here’s a quick list of items to keep in your “2009 Income Tax Folder” (If you don’t have one, go ahead and get one. It will be worth it.):

• Copies of your car tag receipts - This is my most often forgotten item. We need the ad valorem taxes for your itemized deductions. We don’t need to know that your tag says 1HOTMOM but that is pretty cool.
• HUD-1 settlement statements on any real estate purchases, sales or refinances. Many times these statements reflect deductible expenses such as points or real estate taxes paid at closing.
• Receipts for charitable contributions. Whenever you are cleaning out those closets, make sure to get a receipt for your donations of goods to charities. So many times, I have clients tell me that they donated items to Goodwill or Salvation Army but failed to ask for a receipt. Also, go ahead and provide a value of your donated goods. This is a lot easier to assess at the time of the donation rather than a year down the road when you are frantically trying to get your tax stuff together. Donations to your friends, kids or neighbors are not tax deductible.
• Receipts for college tuition and books. These expenses are easier to keep up with as you pay them, so make a copy and put it in your tax folder.
• Copy of your new car purchase papers reflecting sales tax paid. This deduction is now available to non-itemizers.
• Copy of your real estate tax payments made during 2009. There is a deduction available for non-itemizers as well as people who itemize.
• If you use your vehicle for business, make sure and keep a log of your business miles. This deduction adds up rather quickly. You are also entitled to deduct mileage for medical purposes if you itemize your medical expenses.
• If you are blessed with the birth or adoption of a child during the year, your tax professional will need to know the child’s social security number and date of birth. You will also need to provide information on your child care payments in order to take the Dependent Care Credit. Certain adoptions expenses may qualify for a credit also. We know you are equally proud of your new Yorkie so feel free to send us a picture but don’t expect to claim the little fella on your return.
• Don’t forget to let your accountant know that you moved! You wouldn’t want us to move and not tell you, would you? If your move is associated with a job change and you move more than 50 miles from your old job, then you can most likely deduct the unreimbursed costs of your move.
• If you change your marital status during the year, you should let your accountant know. Your marital status as of December 31 determines whether or not you file as married or single. Many times, you will need to adjust your withholding when you change your marital status.
• Job changes affect your taxes! If you change jobs, you will be asked to fill out a new Form W-4 withholding statement. Make sure this is filled out properly to avoid unpleasant surprises next April. Also, if you become self employed or take on a second job, you may need to pay quarterly estimates.
• Considering retirement? Did you know that your social security income can be taxable? Many times this comes as a shock to new retirees. Let your accountant plan with you for retirement so you can enjoy your days fishing with the grandkids.
• If you pay quarterly estimated tax payments, keep a copy of your check and payment vouchers so that your accountant will have a confirmation of what you have paid. As hard as it is to imagine sometimes people “forget” to pay these and if we assume that they are all paid, we are guaranteed a dreaded letter from the IRS.
• Rather than wait until tax season to update your bookkeeping on your small business, why don’t you go ahead and ask for some help on getting started with QuickBooks or some other accounting program? The “off season” makes for a more relaxed time to assist clients with bookkeeping set up and maintenance. Plus, we can help you reduce your accounting fees down the road by getting everything set up correctly on the front end.
• If you make energy efficient improvements to your home in 2009, these may qualify for a tax credit. Make sure and put all of your receipts in your tax folder.
• Generally, retired persons are required to take a distribution from their IRA each year. This requirement has been waived for 2009. So, if you don’t need the money, you may want to evaluate if it is best to postpone withdrawing any funds this year.

As you can tell, I get real excited about taxes. I think about taxes 12 months a year. Most people think I’m pretty strange. Actually, I’m just trying to be helpful. Planning ahead really does save money. I haven’t met anyone yet that didn’t like to save money. Organize and plan. Tax season will be back around before you know it.

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Beth is president of Burgess ∙ Crechale, PA in Flowood, Mississippi. The firm specializes in small business accounting, consulting, tax preparation and retirement plan administration. When Beth isn’t busy solving tax crises, she enjoys spending time with her husband and daughters and cooking for college kids.