Start preparing now to file your taxes
The Washington Post - Washington, D.C.
By Benny L. Kass, Published: February 8, 2014
"The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin." Mark Twain.
Happy New Year. The festivities are over, the children are enjoying their new toys, and you are trying to decide when to file your income tax return. Should you file now, especially if you expect to get some money back, or should you wait until April 15th. Or should you request the automatic extension, so although you will have to pay any tax you owe in April, the final return does not have to be filed until October 15th.
These are questions which only you can answer. But regardless of when you decide to file, you should start preparing now. Every year, the IRS circulates a large publication, entitled "1040 Instructions" which is available on their website. According to the IRS, the average time required to complete and file Form 1040 (the most commonly used income tax return form) is 15 hours. The bulk of this time - 8 hours - involves only record keeping; tax planning accounts for 2 hours, completion of the form and submission another 4 hours, and one hour for miscellaneous.
By the end of January, you will be receiving many forms from your employer and from your lender. By law, any lender (private or commercial) that receives $600 or more in mortgage interest must send the borrower Form 1098. Although in recent years, most consumers were not paying points to buy down a mortgage loan, any points that were paid must also be listed on this form. The form will also include any mortgage insurance premiums that were paid last year.
If you paid such insurance premiums on policies issued on or after January 1, 2007, and if the policy was for "acquisition debt" - which refers to a home that you purchased or substantially improved - those payments may be deductible on your 2013 tax return. Unfortunately, this was one of the many tax benefits that Congress did not extend for this year.
When you get Form 1098, don't just put it in your "tax file". Review it carefully, since the same information has been transmitted to the IRS. Get an amortization table - available on the internet or in local bookstores - and make sure that all of your payments have been properly credited. This is especially important for those of you who have been making extra principal payments over the years, so as to reduce your loan obligation as quickly as possible.
And if you bought or refinanced a house (including a condominium or a cooperative apartment) last year, there may be real estate tax adjustments or interest payments reflected on the HUD-1 settlement statement which numbers may not be included in the 1098 form.
Every year, there is always something new in the tax law. Sometimes, it will cost you more money. For example, beginning in 2013, a 0.9 percent Medicare tax may be imposed, depending on your income.
But you may also get a tax benefit. If you have a same-sex spouse whom you legally married in a state (or even a foreign country) that recognizes same-sex marriage, you and your spouse generally can use the married filing jointly or married filing separately on your 2013 return. According to the IRS, this is true even if you and your spouse now live in a state that does not recognized such marriages.
I am always asked - especially by homeowners who for the first time will be able to itemize their tax deductions - what's the best way to start. My suggestion: go to the IRS website, and download a number of their helpful publications.
Recently, the IRS announced that it has significantly updated "Your Federal Income Tax". According to the IRS, Publication 17 includes important changes to help taxpayers "get the most out of various tax benefits and get a jump on preparing their 2013 federal income tax returns." This 292 page guide contains thousands of interactive links to help taxpayers quickly get answers to their questions.
Other publications which may assist you include: #1 - Your Rights as a Taxpayer; #502 -Medical and Dental Expenses; #504 - Divorced or Separated Individuals; #523 - Selling Your Home and #530 - Tax Information for First Time Homebuyers.
A complete list can be found at www.irs.gov, click on Forms and Publications.
Additionally, you can obtain free help with problems you cannot resolve on your own by contacting the IRS Taxpayer Advocate Service. According to the IRS, there are offices in every state as well as in the District of Columbia. For more information, go to taxpayeradvocate.irs.gov/individuals/get-tax-help.
Finally, beware of scam-emails or phone calls. The IRS periodically issues a warning not to provide any personal and financial information - such as name, Social Security number, bank account and credit card or even PIN numbers - to anyone calling or emailing claiming to represent the IRS. The Service makes it very clear: we do not send taxpayers e-mails about their accounts. And the only way to get a tax refund or to arrange for a direct deposit is to file a tax return. For more information, see "Suspicious e-mails and identity Theft" in the IRS website.
Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.