Taxes

Scottsdale tax preparation time may seem a long way from now, but with 2016 rapidly coming to a close it’s never too early to begin thinking about your 2016 taxes. According to the U.S. government, it is estimated that approximately 60% of individual taxpayers use paid tax preparers to fill out, calculate and complete their income tax returns. If you’re included in that 60% it’s probably a good idea to at least be thinking about your plans – it could mean the difference between having a good experience and a bad one.

Some tax preparers choose to meet with you directly to get the information they need, while others will have you fill out a questionnaire. This article will focus on ten steps you can take regarding your Scottsdale tax preparation and planning with only a few weeks left in the year.

Your Scottsdale Tax Preparation To-do-List

Scottsdale tax preparation deadlines are still a ways off, but you should use this time to get ready for the inevitable.

Select a preparer
If you’re contemplating using an accounting professional to handle your Scottsdale tax preparation, it’s a good time to start looking for one. One of the best sources for referrals of good tax preparers is to ask friends, business associates, your lawyer or your banker. During the consideration process, make sure the candidate you’re thinking of retaining has a Preparer Tax Identification Number (PTIN) confirming that he or she is qualified. The PTIN is proof that person is authorized to prepare federal income tax returns. The next step in choosing a preparer is to ask questions about the preparation fees. Nobody likes surprises – especially at tax time – so understand what the charges will be ahead of time. Most preparation fees depend on the complexity of your return and the time it takes to complete the various information requirements, but most tax preparers can give you a price range so you’ll know what to expect. A word of advice: Don’t do business with a tax preparer that will charge you a percentage of your refund.

Set up an appointment
Because experienced tax preparers are very busy during the peak “tax season,” its best to schedule an appointment in advance – even if it’s for late January or early February – just to make sure you can get on their appointment calendar. Of course, if you’re expecting a refund, the sooner you can get your information together and meet with your tax preparer, the sooner you can file and receive your refund.

Gather your information
Under normal circumstances by the end of January you will likely receive a number of pieces of information you’ll need to give your tax preparer to complete your returns. Here are some of the most common forms:

•  Form W-2 if you were employed
•  Form SSA-1099 if you received Social Security benefits
•  1099s to report various additional sources of income (especially if you were an independent contractor)
•  Form 1095-A to report information from the federal government marketplace from where you bought your health insurance coverage
•  1098s reporting mortgage interest paid, student loan interest paid, or college tuition payments
•  Form W-2Gs to report gambling winnings
•  Schedule K-1s to report income or loss from business entities in which you have an ownership interest

Collect your receipts
If you choose to itemize personal deductions rather than claiming a standard deduction, you’ll need a greater degree of verification and proof in the form of receipts. If you’re itemizing, collect the receipts (or cancelled checks) you have for such things as medical costs not covered by or reimbursed by health insurance, property taxes and employment-related expenses.

Assemble your charitable contribution records
If you choose to itemize deductions, you’ll need to have detailed records to legally claim any tax write-off. Charitable contributions of $250 or more require a written confirmation from the charity verifying the contribution and stating that it was a qualifying donation.

Be prepared for tax law changes
Your Scottsdale tax preparation expert should be able to help you be aware of any new tax rules and regulations so you can avoid any unpleasant surprises. The individual healthcare mandate (the Affordable Healthcare Act) created a myriad of changes, as many will remember. We recommend asking your tax preparer what changes, if any, may affect you this year or you can go online to www.irs.gov.

Provide a list of personal info
Give your tax preparer information such as your Social Security number and those for each dependent you claim on your returns. In addition, list the addresses of real estate you own, including a second home or rental property, if applicable. Your tax preparer may ask for additional information on these properties, as well.

Will you file for an extension?
If you know now that you’ll need additional time to complete your tax returns prior to the April 17th deadline (normally the 15th, but the 15th is on Saturday in 2017 so you'll have two extra days), alert your tax preparer. More often than not, items like Schedule K-1s can cause taxpayers to file for an automatic 6-month extension.

Decide what to do with you refund
If you’re entitled to a tax refund, there are several options as to the instructions you can give to the IRS (the federal government) to do.

  • Have some or all of it applied to your income tax bill on your next return.
  • Have them send you a check or use direct deposit into a designated account.
  • Contribute some or all of the refund to certain types of accounts for the expressed purpose of purchasing U.S. Savings Bonds through Treasury Direct.

Locate a copy of last year’s tax return
If you choose a new Scottsdale tax preparation professional you’ve not worked with before, it will be helpful for him or her to have access to information on the previous year’s return. For example, payers of interest and dividends, and information on your favorite charities would be important reminders as they rarely change from one year to the next.

You can find more articles pertaining to Scottsdale tax preparation in the Taxes section of our site below Scottsdale Real Estate Categories in the column to your right.

We also post tips daily on Twitter and Facebook and would love for you to follow us there as well.

Scottsdale tax advantages are one of the many perks to home ownership. Tax deductions are important to those homeowners who itemize when they file their personal income tax returns. With the tax deadline quickly approaching, it's important to know how to calculate your homeowner tax benefits. Here's a brief analysis of how your tax advantages work.

Scottsdale Tax Benefits: How to Calculate

Scottsdale tax deductions are important to those homeowners who itemize when they file their personal income tax returns.

The cost of your primary residence.
If you own a home and have a mortgage, your monthly housing expense is made up of four integral parts: principal, interest, taxes and insurance. The four components are commonly referred to as PITI.

Your monthly mortgage payment to your lending institution includes principal (the amount of money your borrowed) and interest (the contracted percentage rate calculated each month on the outstanding principal balance.) As you make payments, principal reduces the balance of your loan each month, while interest is the cost of borrowing the money paid to your lender each month.

Taxes are real estate property taxes assessed by your county and/or city each quarter, semiannually or annually. Your tax bill is dependent on the assessed value of your home and will vary from state to state

Insurance is comprised of premiums paid to a homeowner's insurance company to protect you and your mortgage lender in the event your home is damaged by a fire, flood, earthquake or other disaster.

Let's take a look at an example of what the PITI payment may be on a typical home.
Say you purchased a home for $300,000 with a 20% down payment. Let's assume you obtained a 30-year fixed rate mortgage at 3.5%. Using a popular mortgage calculator, here's your approximate PITI breakdown:

Principal and interest (the mortgage payment)                                                $1,077 per month
Property taxes (using a U.S. average rate of 1.2% on the $300,000 value)    $   300 per month
Homeowner's insurance                                                                                   $     75 per month
TOTAL COST                                                                                                  $1,452 per month

Annual Scottsdale tax advantages for a homeowner's primary residence.
When you own a home and use it as your primary residence, you are allowed to deduct the annual interest on your mortgage loan and the real estate property tax you pay each year.

Using the above illustration as an example, of the total principal and interest payment of $1,077, around $700 is the interest portion and $377 goes toward paying down the principal. Therefore, the amount of interest you will pay during the year will be roughly $8,400 ($700 per month x 12 months.) 

Again, using the example above, the property taxes are $3,600 annually ($300 per month x 12 months.)

Added together, these two amounts — your mortgage interest and your real estate property taxes – total $12,000. That full amount may generally be deducted from your income taxes, (for low-to-moderate-income homeowners.)

How do tax deductions help save money?
In preparing to file your income tax returns each year, you may have heard of a form called Schedule A: Itemized Deductions. That's where you list allowable deductions that are deducted from your income. The result is you pay taxes on a lower income amount.

Schedule A contains line items for mortgage interest and real estate property tax deductions. Using the above example, the IRS allows you to itemize the $8,400 in mortgage interest paid during the taxable year, as well as the $3,600 in real estate property taxes paid during the taxable year.

By itemizing those two allowable deductions, you can reduce the amount of income on which you will pay taxes by $12,000.

To complete the example, let's say you earned a total of $90,000 during the taxable year. The two line item deductions above totalling $12,000 are subtracted or "deducted" from your $90,000 gross income for an adjusted gross income on which you'll be taxed of $78,000.

While different income levels are taxed at different percentage rates, you'd be taxed at roughly a 28% tax rate on this income amount. Estimate the amount of savings the tax deductions save you by multiplying the $12,000 in deductions by the 28% tax rate. That produces an estimated annual Scottsdale tax savings of $3,360. That's the amount of savings you will enjoy by owning a primary residence with a mortgage.

Taking it a step further, if you convert the annual savings of $3,360 to a monthly amount of $280 and subtract it from the total PITI above of $1,452, the net "after-tax benefits" monthly cost is reduced to $1,172.

Additional Scottsdale tax benefits.
There are additional tax advantages for owners of primary residences that should be considered. Points paid to a mortgage lender for the origination or refinance of a mortgage loan are deductible. In addition, home energy credits, deducting mortgage insurance for lower earners and deductions for a home office are all examples of allowable tax deductions. However, each can be a little tricky, so make sure you read the fine print and understand what's allowed. We suggest you get answers from your CPA or tax advisor.

There are other homeowner tax benefits you may enjoy when you sell your primary residence. Single taxpayers are exempt from having to pay capital gains taxes on up to $250,000 in capital gains realized from the profit of selling their home. The exemption increases to $500,000 for married taxpayers. Plus, any money you spent on home improvements or renovations while you owned the property will reduce your capital gain.

The above information applies to primary residence owners. Some of the rules may also apply to second-home owners. Consult your Scottsdale tax advisor for variations on second-home deductions. And, if you own rental property, it's a good idea to also discuss your tax benefits with a CPA or tax professional,

Get more Scottsdale tax tips at our Taxes section of articles just below Scottsdale Real Estate Categories to your right. Follow our posts also on Facebook and Twitter.

It's almost time for filing Scottsdale tax returns and the IRS would like you to be aware of some changes before you file your 2015 returns. First, due to the Emancipation Day federal holiday in Washington, DC the filing deadline will be Monday, April 18th this year. When you do get ready to file, consider this.

Filing Scottsdale Tax Returns? Do This

Be aware of the new 1095 form. It requires you to report to the IRS where you obtained your health insurance. The Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C.  The penalty for not having health insurance has increased substantially this year – to $325 or 2% of your taxable income, whichever is greater. For individuals who bought insurance through the health care marketplace, the 1095 form will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

Here are a few suggestions to help make filing your Scottsdale tax returns a little easier this year.

1) Make sure you have all of the documentation needed: tax forms, W-2 forms, 1099 forms, deductions, etc.

2) You can download a free copy of the IRS guide that explains tax deductions and other information. There's also information available on the irs.gov website for how you can get help if you need it.

3) Taxpayers making less than $62,000 yearly can file tax returns online – for free. Following these tips and others will help make Uncle Sam a little happier – and it may just make tax season a little less taxing for you.

 
For more information on Scottsdale tax returns, see our articles to the right under Taxes below Scottsdale Real Estate Categories. We also post articles on Facebook and Twitter, so look for us there, too. And have a Happy Valentine's Day!

Scottsdale tax deductions are valuable commodities. And like most valuables, they are often well guarded. Deductions have been compared to buried treasure — because they are so valuable and they’re often buried, or at least hard to find. Deductions reduce the amount of income you’re taxed on, which reduces your tax liability. Here are a few deductions that are often overlooked.

5 Overlooked Scottsdale Tax Deductions

Charity. Most people are aware they can deduct charitable contributions. But, did you know that if you volunteer your time you can also deduct 14 cents per mile to and from the charity’s location? In addition, you can deduct the cost of supplies needed for the work you perform for the charity.

State Sales Tax. When you’re filing your tax return, you have to choose between deducting state sales taxes and state income taxes. So, this deduction is best for those taxpayers that don’t have a state income tax.

Dependent Care Credit. While most parents of young children are familiar with the dependent care credit, many may not be aware that it may also apply to summer day camp costs. You may even qualify for a deduction for adult dependent care. Some restrictions apply, of course, but it may be worth looking into when you’re looking for Scottsdale tax deductions.

Retirement Plan Contributions. Contributing to your retirement plan can earn you a deduction. If you are in the low to moderate income range, you may also be able to earn a tax credit for the contributions to your retirement account. For more information, search the web for Retirement Savings Contribution Credit.

Job Search. If you’re searching for a job, you can deduct a number of things such as employment agency fees and resume preparation costs. Every dollar you can deduct can save you from 10 cents to 40 cents on your income taxes. So it pays to find as many Scottsdale tax deductions as possible that apply to you. Be diligent in your search, or even better, consult a tax professional well versed in deductions for which you may qualify.

For more information on Scottsdale taxes, see our articles to the right under Taxes below Scottsdale Real Estate Categories.

Scottsdale taxes can throw some retirees a curveball if they're not knowledgeable or prepared. Like most Americans, you've worked hard all your life and saved or invested for years to be able to enjoy retirement. What you don't know about taxes could make retirement a little less enjoyable.

Scottsdale Taxes – What to Know

IRA or 401(k) accounts. If you withdraw money from a traditional IRA or 401(k) you will be taxed as if it was ordinary income. Withdrawals of earnings from a Roth IRA, however, are tax-free if you're at least 59 1/2 and the account has been open for a minimum of 5 years. Remember, contributions to your Roth IRA can be withdrawn at any time tax-free since the contributions were made with after-tax money.

Regarding taxable accounts, the tax liability depends on the kinds of investments you own and how long you've had them.

Savings accounts and CDs. Interest is taxed as ordinary income.

Stocks, mutual funds and other investments. You will pay no tax on the capital gains from the sale of stocks or mutual funds if you're in the 10% or 15% tax bracket — provided you've owned those investments for a year or longer. People in higher tax brackets will pay 15% on long-term capital gains.

Government pensions or private retirement pensions. These retirement pensions are usually taxable at your ordinary income rate.

Social Security benefits. Surprising to many retirees is that a portion of your Social Security benefits may be taxable. The tax liability depends largely on your other sources of income and their amounts. Up to 85% of your Social Security benefits could be taxed.

The impact of state and local taxes. If you move out of state, you could be facing a higher tax bill. While seven states have no income tax, they compensate by having higher real estate taxes or retail sales taxes. Still, many states with income taxes make retirement attractive by offering retirees generous breaks that may help to lessen or erase your tax bill.

 
 For more information on Scottsdale taxes, see our articles to the right under Scottsdale Real Estate Categories.