Posted on December 1, 2016November 30, 2017 by Jan Roberg

Itemized Deductions 2017

The House and Senate Tax Plans call for eliminating many current tax deductions like state and local income taxes.

Is 2017 your last chance to itemize your deductions? It’s possible. The House and the Senate both have tax plans out and they both look like many things that we currently itemize will be on the chopping block for 2018.

That’s not all bad, the trade-off will be a larger standard deduction and for many people, lower tax brackets. This is not law yet, but it is looking likely something will pass.

Normally, I don’t like to do tax planning based upon speculation. But here’s my opinion–you know that you may claim itemized deductions for 2017. You don’t know if you can claim them for 2018. It seems to me, that it makes sense to stack as many of your deductible expenses on your 2017 return as you can so you won’t lose them if the law changes.

So what’s at stake here? Currently, the new tax proposals would eliminate the deductions for medical expenses, state and local income taxes, real estate taxes, and employee business expenses. (The current plan keeps the charitable donation and the mortgage interest deduction.)

So what does that mean? How would you “stack” your deduction? Let’s use state and local income taxes for an example. If you make estimated tax payments, your fourth quarter payment isn’t due until January 15th. That payment gets applied to your 2017 state tax return as tax paid, but if you pay the estimated payment on January 15th, you can’t claim it as a deduction on your federal return until you file your 2018 tax return. By making your estimated tax payment by December 31st, you move that deduction up to your 2017 federal 1040 return.

I live in St Louis and many of my clients have to pay City of St Louis income taxes. Almost everybody pays those taxes in April, when they file their tax return and then we claim the deduction on the next year’s taxes. But, you can actually make an estimated payment for the City of St Louis tax. By paying the tax in advance, you can also move that deduction to 2017 instead of losing it next year. Here’s a link to the City of St Louis Estimated Payment Voucher There are other cities and localities with taxes that this would apply to as well.

So does it really make a difference? Well yes it does! Let’s say your estimated tax payment is $500 and you’re in the 25% tax bracket. That would be a tax savings of $125. Now before, it would have been save $125 now, or $125 later – but if the GOP plan gets passed, there is no $125 later.

Medical expenses are another potential item on the chopping block. If you have enough medical expenses to itemize on your return, it might make sense to pay for any additional procedures, or buy your glasses, or refill prescriptions before the year ends.

If you claim employee business expenses (that includes job hunting costs) and you’re trying to decide if you should make a purchase now or later, it might be a good time to buy now so you can put it on your 2017 taxes.

And don’t forget to pay your real estate and personal property taxes before the end of the year if you want to claim them on this year’s taxes. Remember, you can only claim the deduction in the year you actually paid the tax!

I’ve got one important caveat here: if you have to pay the Alternative Minimum Tax (AMT) – moving up tax payments might not help you at all because with AMT you don’t get the use the state income tax deduction or the deduction for employee business expenses. If you’re a high income earner, you might want to run the numbers to see if you’ll actually benefit from moving any tax deductions up or not.

So like I said, the current House and Senate tax bills are not law yet. But given the political climate, it’s highly likely that it will pass and I’d hate to see you lose out on a deduction that you could easily be claiming. But even if it the new tax bill doesn’t pass, you’re just getting the tax benefit now rather than later.

Posted on June 6, 2016November 30, 2017 by Jan Roberg

What You Need to File Your Taxes

Sometimes, the hardest part about filing your taxes is getting the paperwork together.

Whether you’re hiring a professional or preparing your own return, make sure you have all of your paperwork together before you start. If you’re expecting a refund, you’re probably anxious to get everything together so that you can file as soon as possible. For those of you who expect to pay, you’re probably not too thrilled about it. I know I never am anyway.

Here’s a list of some of the more common documents associated with filing. Not every person will have every form on this list, but hopefully this will help jog your memory so that you don’t forget something you need.

W-2 forms – that’s your statement of wages, you’ll need a W-2 for each job you held
1099 forms – there are several types:
- 1099-INT for interest
- 1099-DIV for dividends
- 1099-B for sale of securities (some companies, like Edward Jones or Raymond James, will send out a combined form that has your 1099-INT, 1099-DIV and 1099-B all in one statement)
- 1099-R for annuities, pensions and other retirement plan withdrawals
- 1099-G is for government payments like a state tax refund or unemployment benefits
- 1099 MISC is for miscellaneous income, like commissions or non-employee compensation
- SSA-1099 is for Social Security income — a note about the SSA 1099 form, it has to be the most frequently lost form on the planet. It’s usually the first one mailed out and I think it kind of gets lost in the shuffle. If you receive Social Security benefits, or are assisting someone who does, please make sure that this form is included with the other tax documents. For some people, it’s not taxable—but you need to include the figures from this form when preparing your taxes to determine if it is taxable or not.
- W-2G is for gambling income. If the Social Security form is the most frequently lost form, the W2-G comes in second. If you’ve received one of these statements, you need to include it on your tax return. If you don’t, you will get a letter from the IRS. (Gambling losses, up to the amount of winnings, can be deducted on your Schedule A.
1098 tells how much interest you paid on your mortgage – you want this because it can be used as a deduction
1098-E shows interest paid on a student loan – ditto!
1098-T shows the amount of tuition paid at an educational institution (you need this to claim those college tax credits.) Here’s the kicker, if you’re the parent paying the tuition, you won’t get the form, your student child will. You may need to work at getting your student to download this of the student portal.

If you sold stocks, mutual funds, or real estate, you’ll want to have your basis information on hand. (Basis is what you paid for the property. Many investment firms include the information right on your 1099B, but some don’t, especially if you sold old stocks.) Make sure you have this information ready before you file – it can save you lots of money!

If you purchased or sold a home this year, you’ll want to have a copy of your settlement statement. Depending upon your situation, there may be valuable deductions hidden in those statements.

If you are a member of a partnership, joint venture, S corporation, estate or trust, you will also need a copy of the Schedule K-1. Those forms aren’t required to be completed until March 15^th, so you may not be able to file your personal return before then. It’s a good idea to make your tax appointment once you have all of your other forms together. The K-1 information can be added at a later date.

And of course, you’ll want to have all the documents to support your deductions like real estate taxes, charitable contributions or deductible business expenses.

It’s always a good idea to have a copy of your last year’s return with you also. Sometimes you might have items that can carry forward into the next year. If you don’t provide you preparer with your old return, you’ll miss those deductions and credits.

If you save all the mail that says “Important Tax Information Enclosed”, you’re onto a good start. Having all of your tax paperwork together before you start your tax return is one of the best ways to avoid getting a letter from the IRS later.

Posted on February 17, 2012May 31, 2016 by Jan Roberg

What All Those Boxes on Your W2 Mean

Photo from 401Kcalculator.org via flickr.com

Did you get your W2 from your job and it looks like some foreign language? All the little boxes have some letter or number attached, but what does it all mean? Let me walk you through it.

The two most important parts are: ‘How much did you make?’ and ‘How much tax did Uncle Sam take out?’

Box 1: Wages, tips and other compensation. That’s how much you made; it’s going to go on line 7 of your 1040 or 1040A federal income tax return (line 1 on the 1040EZ).

Box 2: Federal income tax withheld. That’s the tax you paid. It goes on line 62 of the 1040 (line 7 on the EZ and line 36 on the 1040A).

The other numbers aren’t quite so important, but if you’re curious, I’ll explain the rest for you just so you know.

Box a: Employee’s social security number. That’s your social security number. If you don’t have a social security number, they’ll use your ITIN number. It’s important that your social security number is listed correctly. If there’s a mistake here, you should ask your employer for a corrected W2.

Box b: Employer identification number (EIN). That’s the ID number for the company you work for. It’s kind of like a business social security number. If you’re preparing your own tax return online, you’ll have to type that in correctly. A mistake here will get your tax return rejected.

Box c: Employer’s name, address, and ZIP code. Although this seems pretty obvious, this can really confuse people. Let’s say you work at a McDonald’s in St. Louis but when you get your W2, it says you work for Fred Jones LLC with an address in Kansas. A lot of times companies have their “legal” names, and their “doing business as” names. Usually, it will say the DBA name also, but not everyone does that. Don’t die of shock if you see a funky name, it’s pretty normal and legal.

Box d: Control number. Often, that’s blank. If there is something there, you don’t have to worry about it. That’s more of a code for bookkeeping purposes. I have one employee and I had to give him a code for my payroll program. I didn’t know what to do; 7-11 was the first thing that popped into my head (because I had stopped for a Slurpee.) Hopefully, if you have a control number, more thinking went into it than with my company.

Box e: That’s your name. Check, make sure you got the right W2. I was just working on a tax return and the person had been given someone else’s W2. Weird stuff happens.

Box f: That’s your address. If it’s wrong, you can hand write the correct address. Unlike an incorrect social security number which really needs to be fixed by your employer, an incorrect address is not that big of a deal.

We’ve already talked about boxes 1 and 2 being wages and federal income tax withholding. Now let’s talk about those other numbers.

Box 3: Social security wages. Usually, this will match box 1. There are a couple of things that will make those boxes not match.

You’ve made contributions to a 401(k) or 403(b) retirement plan. You’ll know if you did that by looking at box 12 and finding a code D there. Generally, if you take the amount of money in box 12 and add it to box one, you’ll get box 3.
If you made over $106,800 your box 1 and box 3 numbers will also be different. It’s called the “wage base limit.” Basically, once your income goes over $106,800 you don’t pay any more social security tax. So the number in box 3 won’t go over $106,800. If you had two jobs and your combined income goes over that number, you can get a refund of your excess social security withholding.

Box 4: Social security tax withheld: For 2011 that number is .042 times whatever is in box 3 – plain math. If you have something in box 7 (tips) then it should be .042 times the wages plus the tips.

Box 5: Medicare wages and tips: Usually, this matches box 3. If you earned tips, that gets added in; also if you took money out for retirement, that’s added in too. Also, there’s no cap on the amount of money you pay medicare tax on, so if you made over $106,800 then you pay tax on your entire wage.

Box 6: Medicare tax withheld: plain math, .0145 times whatever is in box 5.

Box 7: Social security tips: unless you’re wait-staff at a restaurant, you probably will have nothing listed there. This box is for tips you reported to your employer. Usually, it’s the tips that you got on credit card receipts.

Box 8: Allocated tips: This is one to watch out for. Once again, for most people, it’s blank. If you work in a restaurant and you have a number in this box you want to look hard at this number. That means that your boss decided that you didn’t report enough tips and so he “allocated” tip money to you. You have to pay tax on that. Now if you really did earn that in tips, then it’s no problem. But if you’re working at a place with lousy tips and there’s a big number in box 8, you’ve got some issues. The only way to fight this is to keep a really good log of your tip income. Most people don’t keep a log, and then when they get the “allocated tip” item on their W2 it’s too late.

Box 9: Nothing’s there.

Box 10: Dependent care benefits: That’s for when your company pays for your day care. If there’s something in this box, your tax return must have a form 2441 for child care expenses attached to it.

Box 11: Non-qualified plans. For most people this is blank. A non-qualified plan is retirement money that you don’t get to deduct.

Box 12: This is where all the extra goodies go. It could be a whole other blog post. Bottom line, the most common item is coded D or E for retirement funds. For the full list, you can look at the IRS website: http://www.irs.gov/pub/irs-pdf/fw2.pdf. It starts on page 7 and finishes on page 9. Some of those codes require you to file extra forms—for example a code V means you must file a Schedule D (employee stock options) and a code L means you must file a form 2106 (employee business expenses.) If you’re seeing codes in box 12, it’s at least worth a phone call to a professional just to double check what you need.

Box 13: Those are check boxes for statutory employee (means you’ll need a schedule C), retirement plan (which may limit how much you can contribute to an IRA), and third-party sick pay.

Box 14: Other. Usually that’s blank. Sometimes it lists things like union dues or United Way contributions. A lot of times I find the stuff that should have gone into box 12 in box 14, so always look at it if there are numbers in there.

Boxes 15 and up contain your state and local income tax information. 15 has the state and the employer’s state ID number. That’s important to have if you’re e-filing your return.

Box 16: State wages. This usually matches box 1, the federal.

Box 17: State income tax withholding. You’ll need this information to file your state tax return.
If you live or work in an area with a local tax, like St. Louis City, your local tax information will also be listed.

And that’s what’s in your W2.