Harry's 10 tax do's and don'ts
The Christmas tree needles are out of the rug. The groundhog has seen his shadow. Super Bowl XLVIII is history. And the joy of the income tax return looms ahead. To keep you ahead and out of trouble, here are my do’s and don’ts for your 2013 returns.
Let me add that the various tax-return software programs are designed to make sure you get all your deductions and credits, and don’t miss any income. Both TurboTax and H&R Block (the most popular programs) do the job well.
1 START AN IRA, or make the maximum contribution to an existing one. You can get a current deduction for contributions of up $5,500 as long as you have at least that in earned income. You still have until April 15 to get the money in for 2013.
2 GET THE CREDIT for higher education tuition and fees. Using Form 8863, you may claim either the Lifetime Learning Credit or the American Opportunity Credit. These can go a long way to help pay for college tuition and expenses.
3 BE SURE TO USE the right forms. A 1040 is never wrong. A 1040A or 1040EZ may not give you all the proper spaces on the return.
4 TAKE A CREDIT for the elderly or disabled if you’re at least 65 or permanently disabled. This is a limited credit good only if your income is very low. Use Schedule R with either the 1040 or 1040A tax form.
5 TAKE ADVANTAGE OF all of the armed forces tax benefits you have coming, including tax exemptions for such things as combat pay and basic living allowance. “Publication 3: Armed Forces Tax Guide,” from the IRS, walks you through them. Find it at IRS.gov/publications, or call 800-829-3676 to request a copy.
6 CLAIM THE CREDIT FOR dependent care if you have a dependent child and pay money to a caregiver to enable you or your spouse to hold a job. You must file Form 2441 to claim it.
7 REPORT THE TAX DUE on household employees. Too often, this payment (the “Nanny Tax”) is overlooked. (Deliberately?)
8 DEDUCT GAMBLING losses to the extent of gains. There is no direct offset, however. The losses are deducted (limited to the amount of gains reported) as Miscellaneous Deductions (Line 28). Gains go on Line 21 as Other Income.
9 REVIEW YOUR RETURN a few days after you prepare it. This will help to prevent you from making the same error twice.
10 BE ABSOLUTELY SURE to file on time. The penalty for late filing is 5 percent per month up to 25 percent total.
Harry says DON’T…
1 RELY on your neighbor for advice.
2 PAD your expenses. It could trigger an IRS review.
3 OMIT income that’s not on your W-2s and 1099s.
4 MISS taking your Required Minimum Distribution from pensions.
5 TRY to sneak an overpayment to your IRA.
6 MISS a dependent on your return.
7 FORGET to deduct property given to charitable institutions.
8 OVERLOOK medical transportation costs.
9 FORGET that alimony is deductible.
10 ASSUME that you won’t be examined. IRS is pretty good at spotting errors and omissions.
Email Harry Gross at harrygrossDN@gmail.com, or write to him at Daily News, 801 Market St., 300 Suite, Philadelphia, PA 19107. Harry urges all his readers to give blood. Contact the American Red Cross at 1-800-Red Cross.