We all know the feeling — that sudden sense of anxiety in your gut when you think about April 15, tax day.
So many questions, right?
Lucky for us in east King County, there are a bevy of professional tax planners available to help — and help far enough in advance so we can take action now to avoid much of the headaches and stress.
We asked Marc Hutchinson, managing partner at Bashey, Hutchinson & Walter in Bellevue, and David Heyting, a director at Hersman Serles Almond in Kirkland, their thoughts on what we can do to ensure our journey to April 15 is smooth and (almost) headache-free.
Hutchinson suggests to, as soon as you can, perform an analysis of where you are with income and deductions: “Doing tax planning now means you will be forewarned while there is still time to do something about it.”
And it’s important to know the deadlines for deductions or contributions, Heyting adds.
“In order to count as a deduction for your current year tax return, charitable contributions, business and personal expenses, and contributions to a 401(k) plan need to be paid (or withheld from your paycheck) prior to year-end,” Heyting said. “These deductions include amounts paid by credit card before year-end. So don’t procrastinate — and be sure to drop off those donated items at Goodwill or the Salvation Army prior to December 31 and keep an itemized receipt of what you donated for proof of donated value.”
Heyting says what is acceptable to pay after year’s end are deposits into a traditional IRA account or a Roth IRA account (both of which are due April 15) and a self-employed pension plan (due with the filing of your tax return).
Hutchinson says for those over 70 years old it’s important to distribute required minimum distributions before year-end because there are penalties if you don’t.
“Taxpayers with upcoming high retirement income might want to consider whether they can get some money into a Roth account in order to have some non-taxable money available when desired,” Hutchinson said.
Hutchinson also said you should keep in mind that IRS tax code stipulates that gross income from all sources is taxable.
“It’s up to you to ask a professional how to sort out the exceptions,” Hutchinson said. “Be sure to declare all your income. Then you can be more aggressive with the deductions with the assistance of a seasoned tax professional.”
Heyting says common missed deductions he sees, especially when taxpayers prepare their own returns, include:
- Sales taxes on big-ticket items such as cars or appliances
- The annual depreciation expense of owning a rental property
- The Regional Transit Authority Tax paid to register your vehicles, RVs, or boats.
- Medicare premiums of the self-employed.
Before the end of the year, Heyting says taxpayers might consider estimating their tax bills by taking a look at their 2015 tax returns and asking themselves what’s changed.
For business owners, Heyting says if their bottom line has improved they might consider purchasing a business vehicle or making improvements on an existing building to offset the increased income. Or, if you’re a taxpayer with a stock portfolio, you might benefit from capital gains that are pending.
“Look at some of your underperforming stocks,” he said. “Now might be a good time to sell them and take the loss to offset your other gains.”
As far as tax codes are concerned, not much has changed since last year, both men say.
“Other than the small inflation adjustments, there are not a lot of individual tax law changes for 2016,” Hutchinson said. “However, businesses will see quite a few changes, the most important of which are different due dates for the various returns they must file. One advantageous new law for 2016 is that companies doing research and development activities will have better tax credits. Also, be aware the IRS has proposed regulations under review right now that may limit the estate tax advantage of discounted gifting in the future.”
Finally, Hutchinson says, don’t panic if you do make a mistake on your tax return.
“If a mistake to your advantage is discovered, your tax return can be amended within three years of filing,” he said.
Apps to keep you organized
- Mileage Log+