CPA Association Says Taxpayers Need to be Organized, Ask Questions about New Rules and Get Started Now
WASHINGTON (March 18, 2014) – The American Institute of CPAs (AICPA), the world’s largest member association representing the accounting profession, today issued 10 suggestions for individual taxpayers as they get ready to file their tax returns.
According to Edward S. Karl, vice president of taxation for the AICPA, the three best suggestions for taxpayers are getting organized, not waiting until the last minute to begin preparing their tax returns and asking questions. “Many individuals pay more taxes than they are required to under the law because they don’t take the time to organize their paperwork or find out about recent changes,” Karl said. “CPAs can be of tremendous help to a taxpayer particularly if she or he doesn’t wait until the very last minute to get started.”
AICPA’s top 10 tax tips for individual taxpayers are:
1. Get Organized
Whether you have a tax preparer or complete your return yourself, the most important thing to do is keep the W-2 and 1099 forms where you can easily find them. You can’t prepare or file your returns without them. Collect and organize all of the receipts, canceled checks and other documents that support the income, deductions, and credits you’ll be reporting or claiming on your return. The better your records, the more likely you won’t overpay.
2. Don’t Be Late
Your federal tax return must be filed before midnight on Tuesday, April 15. However, taxpayers who file IRS Form 4868 by April 15 can delay filing their federal return until October 15. However, getting the automatic extension does not delay the requirement that you pay your taxes by April 15, and penalties could be imposed and interest charged on taxes not paid by April 15. Don’t forget that many states have different filing deadlines; make sure you know what the due date is for your state income tax return.
3. Protect Your ID
Don’t forget that identity theft is a fast-growing problem in our country and your tax return and most of your records include important identification information. The IRS does not email or text taxpayers to request personal or financial information. Be careful to protect information, such as your Social Security number, that could be used to steal your identity from unscrupulous individuals!
4. Investigate the Details if You Are a Legally Married Same-Sex Couple
For the first time, legally married same-sex couples will file their federal taxes as married filing jointly or married filing separately. The couples do not have to reside in the state in which they were legally married to qualify. The new IRS rules do not apply to domestic partnerships or civil unions. Because state income tax laws vary, same-sex couples may want to get help from a local CPA .
5. Check Your Tax Breaks
Don’t assume you can claim the same amounts in exemptions and deductions that you did last year. New rules have kicked in phasing out exemptions at certain income levels and imposing new limits on deductions. For example, medical and dental deductions must exceed 10 percent of your adjusted gross income, unless you or your spouse is 65 or older and then it’s still 7.5 percent.
6. Prepare and Hold
It’s not unusual for taxpayers to receive corrected 1099 forms late in the tax filing season. If you have investments, prepare your tax return now and then delay filing it electronically until just before the April 15 deadline. That way, you don’t have to rush to prepare the return, you can make any last-minute changes and you avoid having to file an amended return.
7. Review. Review. Review
Two of the most common mistakes made by taxpayers – incorrect Social Security numbers and math calculations – significantly slow down the refund process. They’re also the easiest to correct. Just double check your return before it’s filed
8. Use Direct Deposit
The fastest way to get a refund is to have it deposited directly into your bank account. You won’t have to wait for it to be delivered by the U.S. Postal Service and you won’t have to make the deposit yourself.
9. File Electronically
E-filing is the easiest way to file a tax return. You’ll avoid the last-minute rush and long lines at the post office and you’ll save on postage. Filing your return electronically also expedites its processing by the IRS.
10. Don’t Be Shy
Many taxpayers are uncomfortable asking questions and often pay more tax than they need to because of it. Don’t guess. Your local CPA can help you determine how the tax law applies to your specific situation, including whether you qualify for one or more of the special provisions in the tax code. The AICPA’s 360 Degrees of Financial Literacy website has information on a variety of tax topics. The official IRS website has answers to typical questions.