Happy New Year! Oh, and your taxes need to be filed soon.
Yes, that’s a bit of a downer, there’s no doubt. The last thing you want as you try 2020 on for size is to account for 2019, down to the nickel. But it must be done. So rather than make it a painful process, why not make it as easy as possible?
We reached out to four Philadelphia-area accountants to find out what you can do to minimize your headaches and even get a head start on next year.
Changes to Know
Scott Isdaner, managing member of Isdaner & Co., said that there was a “flurry” of tax legislation that came at the end of 2019, starting with the Extenders Provision.
“The Extenders Provisions generally will benefit tax filers in 2019,” Isdaner said, “and include provisions that reduce the threshold below which medical expenses can be deducted for taxpayers that can itemize deductions from 10% of adjusted gross income to 7.5%, continue to allow qualified tuition deductions up to $4,000 for taxpayers that meet certain income thresholds, and continue to provide credits for home energy saving projects and systems.”
Isdaner added that the Extenders Provision “will be beneficial for those taxpayers who are eligible to utilize the tax benefits associated with the specific provisions to which they relate,” and that several provisions may actually “retroactively benefit taxpayers in 2019 (and 2018).”
Isdaner also mentioned the SECURE Act, signed into law on Dec. 20. His belief in the importance of reading up on the effects of the SECURE Act were echoed by Jacob Cohen, of Jacob Cohen & Co, CPAs; Bruce Marks, a partner at Friedman LLP; and Dafna Meltzer, of Meltzer & Meltzer CPAs, who cautions that it comes with “some significant changes, which affect both the young and the young at heart.” These changes, Meltzer said, include:
- Distributions following birth or adoption: Within a year from the birth or final adoption of a child, any distribution from a retirement account is free of the 10% penalty. Tax is still imposed at regular rates.
- Requirement Minimum Distributions: The age was raised from 70.5 to 72 (as long as you have not reached 70.5 by Dec. 31, 2019).
- Beneficiary IRA: The rules have changed for beneficiaries of decedents who passed after Dec. 31, 2019.
The list above, Meltzer stressed, is not exhaustive.
Best Tax Prep
“Organize, organize, organize,” Isdaner said. “The cost of tax preparation can be reduced if you gather and organize your sources of income and deduction with appropriate documentation of support and present it in an organized fashion. If your tax preparer provides you a tax organizer to complete, answer the questions and review the material to make sure that you have included all information that will assist the preparer.”
Isdaner also recommends speaking to your tax advisor if you’re anticipating any “unusual or out of the ordinary transactions during the year.”
Meltzer was even more specific in her exhortation to organize.
“Now, lots of documents are arriving in the mail, clearly marked ‘tax information.’ Put them, and any other relevant information, in one large envelope, and as early as you can, get that envelope to your accountant,” she said. “In the days prior to April 15, your accountant needs to concentrate on last-minute emergencies, not on clients who waited to the last minute.”
“My best advice here,” Cohen said, “is to closely review your 2018 tax return to be sure you have gathered all current year tax documents that went into the preparation of your returns last year. W-2s, 1099s, mortgage interest statements and charitable deduction letters are the most common documents that should be arriving in the mail right now.” Ask your accountant about that type of mail, he said, rather than ignoring it or throwing it out.
Cohen added that keeping track of new sources of income or deductions can save you a lot of time down the road.
Marks, too, suggested reviewing your relevant information as closely as you can, to save you and your accountant time.
“If a tax questionnaire has been provided by the accountant,” he said, “complete (it) to the best of your ability.”