Have you collected the scraps of paper you carefully squirreled away all last year marked “taxes”? Are they residing on your dining room table in a messy pile, or are they organized into a stack of file folders? Or maybe they’re sitting somewhere in the depths of your computer.
It’s time — maybe even past time, when you get around to reading this — to approach them head on. Either you will do your own taxes, as 43 percent of Americans do, or you’ll gather your information and join the 57 percent who head to a friendly tax preparation specialist, counting on their expertise to help you get all the tax credits you are due. Several local tax preparers were kind enough to offer some helpful tips as you approach the task.
“Make an appointment,” Gary Trujillo, owner of H&R Block in Wellington, advises his clients. “While we accept walk-ins, your wait could be very long.”
He advises people to get organized as soon as possible and to turn in their paperwork even if it is not 100 percent complete. He finds that having a face-to-face discussion with clients is the best way to help them. “Can I really deduct that?” they often say, surprised by his advice. He can also help people to decide if they prefer to get a tax refund, come out about even or prefer to owe an amount when the tax return is complete. “It can be challenging,” he says. “We’re all different and the tax system is full of complexities.”
“We take training every year to keep abreast of tax law changes and we often save our clients money because of what we know,” Trujillo said. “Many people fail to take advantage of deductions or credits such as the earned-income credit, child tax credit and educational credit.”
He warns that people may be surprised this year because the IRS did not process certain tax returns until Feb. 15 because of the PATH Act which is intended to reduce tax fraud. Clients with those specific returns won’t get their refunds until about Feb. 27, a major change from the past.
Brokerage statements came out Feb. 15 and Trujillo says they are frequently corrected a month later. In these cases, his office completes the returns but holds them until after corrections have been received. “If you have received a correction in the past, it is almost assured that you will receive one every year,” he says.
According to Trujillo, the IRS will never inform you when they owe you money. It is up to you to know what deductions and credits you qualify for and request them on your tax return. However, when the IRS is owed money, they never fail to request it. H&R Block guarantees you the largest refund you are entitled to, he says.
Trujillo, whose office is located at 3744 Cleveland Ave. Suite B in Wellington, also has four H&R Block offices in Fort Collins. The most convenient office for people living north of Fort Collins is at 1630 N. College Ave., adjacent to the former location of Albertson’s grocery store.
“We’re here to help,” he says. “Our goal is to improve people’s lives by assisting them with tax preparation.”
Mona Frayer of Frayer & Associates at 501 Stover St. in Fort Collins has some specifics:
• Any one who made a contribution during the year to the Colorado 529 plan, “Scholars Choice,” is eligible for a deduction on their State of Colorado income tax return.
• Deductible or nondeductible retirement plan contributions can still be made for 2016 for some plans. IRA contributions can be made up to April 17, 2017. Individuals under 50 years old can contribute a maximum of $5,500. Those 50 years old and over may contribute a maximum of $6,500. SEP IRAs are for individuals who are self-employed or businesses who want to fund 100 percent of the employee’s retirement. Maximum contribution is 25 percent of income up to $53,000 a year for each individual.
• Capital gains rates are 15 percent or zero percent in cases where the capital gain amount is $200,000 for a single or $250,000 for married filing joint. In Colorado, if the asset in question is in Colorado and has been owned for five years or more and the capital gain is $100,000 or less, there is no Colorado state tax.
Judy D. Wagner, CPA in Wellington, has been at the business for a long time. Below are her words of wisdom:
Tax season is upon us. Many of us are struggling with the annual floor filing system; the sorting tax receipts and documents. Perhaps it would be helpful to review some basic rules that permeate the whole taxing process. There is an old adage: “He who has the gold, makes the rules.” Let’s face it: Congress has the gold, and their IRS makes the rules! The IRS Code of Federal Regulations (CFR) contains the rules we follow to get the tax deductions and credits we seek.
Here are some simple but necessary rules to remember when putting together the documentation needed to prepare your 2016 individual income tax return. It doesn’t matter whether you are collecting the data/documentation to prepare your own tax return or taking the information to a tax preparer.
• Make sure to include all W-2s and Form 1099s you’ve received when reporting your income total. That means Form 1099MISC, Form 1099INT, Form 1099DIV, Form 1099C and Form 1099G.
• Report all cash received for services rendered. The person who paid you wants a tax deduction for the expense and he’ll include the expense in his tax return.
• Double check all SSNs, EINs, addresses and data entry information. Even if you use a tax preparer, you should check.
• Using paycheck stubs to determine gross income can lead to problems and undesired IRS attention. Those numbers should be correct, but they are subject to year-end adjustments and can actually vary materially from your W-2 information. You won’t have gained any time in receiving a refund if the IRS computers find a difference; instead, you’ll stall the processing.
• If you file Form 4868 to get an extension, be sure to pay any likely tax amount owed at that time. Otherwise penalties and interest add up!
• Be careful when you are determining the amount of your charitable deductions. It’s not how much the IRS allows, it is the amount that you can prove with a signed and dated receipt showing the item(s) donated and the amount of charitable deduction.
• If you or your investment advisor sold some of the stock that you own, you need the documentation that shows how much the stock originally cost. That cost is necessary to determine the amount of income or (loss) resulting from each sale transaction.
Remember that in this age of computerized everything, the government also employs computers, programmers and analysts to compare even potentially related taxpayer circumstances, events and income to discover more taxable income.
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