Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
Happy New Year! I hope your holiday season was happy, and I wish you and yours a healthy and prosperous 2014.
Well, here it is, the first full week of 2014. It’s back to work, and back to taxes. Have you started assembling your 2014 tax info yet? No, well don’t feel bad, I haven’t either. Remember though, a journey of a thousand miles starts with the first step; so too, the journey to complete your tax return starts with your first headache.
January To Do’s And Reminders
Reminder #1: When paying bills online, only use secure sites generally marked with a URL that includes https:// (Note the ‘s’ for secure), and safety logos that feature a lock or key.
Reminder #2 — Odometer Reading: If you use your car for business in any way, go to your car NOW, and write down the odometer reading. This will be the jumping off point to compute your mileage deduction. Part of the deduction computation is the total miles added to your vehicle for the year. (Mileage reading on January 1, 2014 minus mileage reading on January 1, 2015.) And buy a diary to record your various business deductions. (Source)
Mileage Rates For 2014 (Cents Per Mile):
Business Mileage $0.56 / Charitable Mileage $0.14
Medical Mileage $0.235 / Moving Mileage $0.235
Reminder #3 — Re-adjust Your Withholding: If you followed my suggestion last year and adjusted your withholding allowances to increase or decrease your income tax to more accurately reflect your 2013 taxes, you may need to re-adjust for 2014.
Reminder #4 — Adjust your Monthly Pension Contribution Amounts:
- 401(k), 403(b), 457: $17,500. Catch-up unchanged at $5,500.
- IRA: $5,500. Catch-up unchanged at $1,000.
- NY State 529 Plan: $5,000 per person, $10,000 married couple.
- Medical Flex Account: $2,500
Make these an automatic weekly or monthly transfer through your paycheck, or from your checking account.
Reminder #5 — Your Tax Appointment: Looking for a quick refund? Need to prepare that FAFSA form? Anxious to see who is going to prepare your return this year (Lincoln, Washington, Sherlock, [who else?]? Call me at (718) 332-1040.
Reminder #6 — Pay Final 2012 Estimated Tax
Reminder #7 — Request Your Free Annual Reports:
- Free Credit Report from TransUnion (later in the year, I will remind you to request credit reports for you and your spouse.)
- How Do I Dispute Information on My Credit Report?
For you and your spouse, check your history:
- How your bank views you as a risk at ChexSystems
- Your medical history used for insurance underwriting
- Your insurance claims history to calculate your potential risk for loss
- Your full disclosure file
AND: Sign up for your free monthly credit score from Credit Sesame.
Reminder #8 — The IRS Does Not Send Out Emails: If you get an email from the IRS, it is a phishing scam and you should not respond to it. The only exception is if you are working with a specific IRS agent and the email is from them.
Reminder #9: Did you move into a new home this summer? If you moved for a job, or even got one soon after you settled into your new locale, you might be able to deduct your relocation expenses on your 2013 tax return. (Source)
Reminder #10 — Tax Appointment: Did you schedule yours? Going to try it yourself? Really? Study areas: tax rate increase, personal exemption phase-out, itemized deduction phase-down, tax rate on investments, 3.8% investment tax increase, 0.9% income surcharge, medical expense deduction reduction. Yourself? Really?
Reminder #11 — Medical Expenses: The medical deduction has been greatly curtailed, but some over-the-counter items are still available including eye care (contact lenses, solutions, & drops), first aid supplies for your emergency kit (bandages, gauze, tapes), family planning products (birth control and pregnancy test kits), and home testing aids (blood pressure kit, diabetes supplies, and thermometers). Check out the list from Aetna for greater detail.
Reminder #12 — Mortgage Interest: Not including business property, you can deduct the mortgage interest on your primary residence, and one other personal-use (non-rented) home. The choice is yours for this second residence.
Reminder #13 — No W-2, No Tax Filing: You must have your W-2 to file your tax return because your final paystub may not have all of the proper figures. And DON’T GET A $200 REFUND ANTICIPATION LOAN (RAL). E-filing begins January 31, and you’ll generally have your money by February 14 without the extra cost.
Reminder #14 — Tax Return Retention:
- For most of us, three years is the rule. (I suggest permanently — it is your financial history.)
- Six years if you’ve underreported your income by more than 25 percent.
- Forever if you have committed fraud.
- Stock purchases: Three years after the stock is sold.
- Rental Property: Keep purchase records, improvements, depreciation records for three years after sold.
- Household records: Telephone, electric, gas, credit card bills — a year.
Scan your important papers into your computer, and back up using an outside service like Carbonite.com.
Reminder #15 — Forgiven Debt: Generally, unless you are insolvent, you are taxed on forgiven debt like a mortgage, credit card, student loan, etc.
Reminder #16 — A 1099-Misc For Whom? Basically, a 1099-Misc is issued to anyone who is an LLC or unincorporated and paid $600 or more for any service they provide to a business, including your real estate rental.
Reminder #17 — Stock Repurchase: Did you sell some stock in December to rebalance your portfolio and take advantage of tax losses and now want to buy it back? Don’t violate the 31 day wash sale rule. (Source)
Reminder #18 — Work For Tips? The new law requires “automatic gratuities” added to restaurant bills to be treated as wages, not tips. Check with your employer. Don’t report these tips twice.
Reminder #19 — Wash Sale Rule: If you sold some stock in December to take advantage of tax losses, remember this restriction: You may not take a tax loss on a security sale if you have obtained the same or a substantially identical security 30 days before or 30 days after a sale. Check with your broker for the required dates.
QUIP: An income tax form is like a laundry list — either way you lose your shirt.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.