BY Molly Congdon
CLIFTON PARK — It’s that season we all dread, the time when we have to haul out our paperwork, receipts and pay stubs and attempt to begin the painful process of doing our taxes.
For many, it’s a combination of a fear of numbers and tiny boxes. Let’s face it; the process can be quite confusing, daunting and exasperating. Where is that Staples easy button when you need it?
Certified public accountant Brian Daley, owner of Brian Daley CPA, located at 964A Route 146, specializes in business and personal consulting services such as tax preparation, bankruptcy tax planning and compliance, estate planning, federal and state audits, offers in compromise, and tax problems including error resolution. He has some tips that will help ease the stressful process.
Rather safe than sorry: Instead of sitting at your kitchen table with papers scattered haphazardly, these days it’s easier and smarter to hand the work over to a professional. “It’s typically no more expensive to have your returns prepared by a CPA than an unlicensed tax preparer,” Daley said. Check recommendations before hiring a CPA or any business professional. This could include online reviews and a check with the state licensing department. Verify that the business is open and available year round.
Be realistic: “Watch out for big refund claims from unlicensed preparers; if it sounds too good to be true, it probably is,” Daley said. “I have seen and heard of many cases of fraud by local unlicensed preparers either underreporting income or inflating expenses in an attempt to get the client a bigger refund. If caught, you’ll pay back the tax plus interest and penalties.”
Balance yourself: “Adjust your withholding or estimated tax payments so that you only get a small refund. Getting large refunds is like giving the IRS an interest-free loan!” Daley said. “On the other side, if you owe too much, you could be penalized. In most cases you can have a balance due without penalty if you have at least 90 percent of your current-year liability withheld or 100 percent of your prior-year liability withheld.”
Don’t wait: Be sure to pay your taxes first, not last. “Many people struggling financially get into trouble by paying credit cards and installment loans and not paying their federal and state income taxes,” Daley said. “Some of these individuals eventually seek relief in bankruptcy and find out that their taxes are not discharged in bankruptcy.”
Save those receipts: “Get receipts for non-cash charitable donations; many people give away items to charity such as used clothing or furniture without getting a receipt,” Daley said. “Receipts are required and you must provide a written description on Form 8283 for amounts over $500. Not sure of the used value? A conservative rule is 20 percent of original cost.”
Don’t discard right away: “Keep tax returns as least three years, indefinitely if they include basis adjustments for business or investment property,” Daley said.
Overlap: Are you thinking about taking a large withdrawal from a tax-deferred account or cashing in appreciated stock for a large purchase? “Sometimes this is best accomplished straddling two tax years rather than one,” Daley said.
See if you qualify: “Take advantage of the 0 percent capital gains rate; if you are in the 10 percent or 15 percent federal tax bracket, you generally qualify for the 0 percent capital gains rate on long-term capital gains as long as you are not a dependent of someone else,” Daley said. “Consult your tax adviser before selling for guidance.”
Bunch it: “For those that do not quite have enough to itemize or are right around the standard deduction amount, consider bunching your deductions every other year,” Daley said. “This can be accomplished by paying for 13 to 14 months of expenses every other year for items such as charitable contributions, mortgage payments (pre-payments only), real estate taxes and estimated state tax payments, which can be accomplished by deferring December payments to January and prepaying January payments in December.”
Do you feel lucky? If you have gambling winnings, you may feel as though you’ve hit the luck button. “Your gambling losses may be deductible up to the amount of your winnings,” Daley said.
Give and take: Are you thinking of giving away assets or money? “For 2015, you can give up to $14,000 per person without any tax implication,” Daley said. “Estate planning is complex and should be planned with your tax adviser well in advance.”
Check before change: “Always check with your tax adviser before making changes that may impact your tax return,” Daley said.