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Don’t Fall For These 5 COVID-19 Relief Payment Myths

Don’t Fall For These 5 COVID-19 Relief Payment Myths

1. Everyone is going to get $1,200.
While many are, the maximum $1,200 person payout isn’t going to show up in every person’s bank account or snail mail box. People who have higher incomes will see their payments reduced phased out incrementally for individuals with no children where their adjusted gross income (AGI) is more than $75,000 for single people; $112,500 for taxpayers filing as head of household; or $150,000 for taxpayers filing a joint return.

The Coronavirus Aid, Relief and Economic Security (CARES) Act that created the payments also decreed that folks won’t get any COVID-19 relief money if their AGIs are more than $99,000 for single filers; $136,500 for head-of-household taxpayers; or $198,000 for married couples filing jointly.

The phase-out income levels are a bit higher for folks with kids. The Internal Revenue Service table below shows how the COVID-19 economic relief payment is reduced based on your AGI and number of eligible children (those age 16 or younger) you can claim.

COVID19 payment phase out for high earners with children_IRS table

Even those who do qualify for the maximum payout could see less when it arrives. The COVID relief payments are not subject to most types of federal offsets that usually are attached to things like your tax refund, such as overdue student loan payments or unpaid taxes. However, if a recipient is behind on child support, that due amount likely will be taken out before the relief payment is made. There’s also the possibility the payments could take a hit from some types of state or local government garnishments, as well as court-ordered paycheck collections.

2. Unemployment benefits disqualify you from getting the payment.
Not true, and that’s a huge sigh of relief you’re hearing across the country from the more than 30 million folks thrown out of jobs since the coronavirus began spreading across the United States. So collect that unemployment check (if your state government is able to get it to you) and expect your COVID-19 economic relief payment, too.

The federal relief payments being distributed now are based on the amount of money you made either in 2018 or 2019. The Treasury and IRS don’t care what you’re making (or not) in 2020. However, this year’s income could come into play as far as COVID-19 relief when you file your tax return next year. If you didn’t get the maximum amount based on your prior taxes, for example, you had an eligible dependent this year who was not shown on your earlier returns, you can claim that relief amount when you file your 2020 taxes in 2021. Yeah, I know. The wait is not what you need. But at least you’ll get your money eventually.

3. The COVID-19 economic relief payment is taxable income.
Again, no. The relief money is not income. It is a tax credit. Just like the child tax credit or Earned Income Tax Credit (EITC), it’s a tax break that’s calculated based on your eligibility and is used to offset any tax you owe. Tax credits aren’t taxed. In some cases, they’re even refundable, meaning you get money back even if you don’t owe taxes. You don’t owe taxes the next year on any credits you get on your prior tax filings.

This tax credit math is usually done when you file your return. But in order to get the COVID relief money out more quickly, it’s being issued as an advance tax credit on your 2020 taxes based on your 2018 or 2019 returns. But its tax treatment remains the same. It’s not taxable.

4. You’ll have to pay back a too-big COVID-19 economic relief payment.
This is the companion to the tax credit myth. Again, not true. While the multiple tax years involved in the COVID relief payments definitely lend to the confusion about the money, the good news here is that if you got an overly large amount based on your 2018 or 2019 returns, don’t worry about it.

Uncle Sam says that even if your 2020 taxes, for which the payment is an advance tax credit, shows you should have received less, you get to keep the over payment that the government made this year. That’s because at the time the IRS calculated the COVID-19 relief amount you were due, the agency was using the latest info it had, your prior filings. So even though it technically is a 2020 tax year advance credit, the timing of its early delivery means that the IRS doesn’t care about your 2020 money, at least as far as the COVID-19 economic relief payment is concerned.

And there’s even better news. As noted in myth #2 and worth repeating here, if you didn’t get as much this year in your COVID relief payment as you eventually find you are due based on your 2020 tax situation, you can collect that unpaid amount when you file your 2020 return next year.

5. There are special ways to speed up delivery of my relief payment.
Treasury and the IRS already have established the payment schedule for the COVID-19 economic relief money. It’s going to direct deposit accounts first, then paper checks will be dropped in the mail. The payments also are being sent to the lowest-income taxpayers first in either the electronic or snail mail delivery route.

The only sure-fire way to get your COVID-19 economic relief payment more quickly is to get your direct deposit data to the IRS using the enhanced Get My Payment tool. If the IRS doesn’t have that information, it will mail you a paper check via the U.S. Postal Service. But you need to hurry. If when you do try to let the IRS know your bank info you find that it’s already decided you’ll get a paper check, you can’t change that. You’ll get a paper check.

So don’t fall for “offers” that promise to get you your COVID-19 money more quickly. Any phone calls or texts or emails from folks, some pretending to be with Treasury, the IRS or the Social Security Administration, are coronavirus scams. Don’t fall for them. It could cost you even more than the relief payment amount you’re expecting.

Stimulus Payments Are Finally Flowing – Did You Get Yours; Was It Correct?

Stimulus Payments Are Finally Flowing – Did You Get Yours; Was It Correct?

The IRS has finally started making those much anticipated Economic Impact Payments, aka “Stimulus Payment.” However, not everyone who was expecting one has received theirs, and some may not be the amount expected.

The Treasury first looked for a filed 2019 return when they began making the payments. If a 2019 return was not filed in time to catch the payment dates, they used the family makeup and income from the 2018 return if one was filed. If neither was filed, then they paid rebates to recipients of Social Security, SSI disability, survivors, Railroad Retirement and veterans’ benefits.

Someone who does not fit into one of those categories is generally deemed to be a non-filer and will not receive a rebate until they either file a return or use the Non-Filer Tool on the IRS website.

You can check on the status of your rebate using the “Get My Payment” feature at the same IRS webpage as the non-filer tool. That same page also provides the ability for some taxpayers to enter their direct deposit information If the IRS doesn’t have your direct deposit information in their records, you can use Get My Payment to submit that information after properly verifying your identity and if the payment hasn’t already been scheduled for processing. To protect against potential fraud, Get My Payment won’t allow direct deposit bank information already on file with the IRS to be changed. However, direct deposit information can be updated for people whose direct deposit information on the last return filed was incorrect and resulted in a paper check being issued for their refund. Unfortunately, address changes cannot be made through Get My Payment.

Also realize there may have been births, deaths, under age 17 dependent children, marriages, separations, divorces, emancipations, and income changes that can cause the rebate amounts to be different from what may have been expected, or in some cases, be incorrect. On top of all that, the rebates are reduced (phased out) for higher income taxpayers, so based on your reported adjusted gross income on your 2019 return (or 2018 if 2019 hasn’t been filed yet), you may only qualify for a reduced rebate or no rebate at all.

The IRS provides an extensive Q&A related to rebate issues and situations that may answer any questions you may have related to your rebate.

Just a Reminder, Tax Day is July 15th

Just a Reminder, Tax Day is July 15th

The outbreak of COVID-15 is forcing people to make changes all around the world, and taxes couldn’t be an exception. That’s why the Internal Revenue Service determined to extend the filing deadline and federal tax payments from April 15 to July 15, 2020.

This measure aims to offer relief to American taxpayers that may have been affected by the outbreak, and may be experiencing difficulties filing their taxes.

An Automatic Measure

You don’t have to contact the IRS send any new forms, or take any additional action to take advantage of this extension. The new date will be automatically applied to all taxpayers, including individuals, trusts, estates, corporations, and other non-corporate tax filers as well as those who pay self-employment tax.

The IRS encourages tax payers who are owned a refund to file as soon as possible, as refunds are issued within 21 days. IRS Commissioner Chuck Rettig advises that filing electronically and with direct deposit is the quickest way to get your refund.

As part of this relief package, taxpayers will also be able to defer federal income tax payments to July 15, 2020, without penalties or interests regardless of the amount owed. Remember that these measures apply to federal taxes, so it’s advisable to check with a tax expert to know more about deadlines and possible extensions for state taxes.

If you would like to request an extension to file your taxes after July 15, you should use Form 4868 with the assistance of a tax professional or using tax software. Companies looking for an extension should use Form 7004.

Get More Information

The situation and measures related to COVID-19 in the United Stated are fluid. The IRS has created a website with specific information about this topic. You can check it here to read the most recent updates and information about relief measures for taxpayers. If you wish to obtain more general information regarding COVID-19, check this official page from the United States government where you’ll find information, resources as well as the latest official news. Go here: https://www.irs.gov/coronavirus

Who Qualifies as a Dependent on Taxes?

Who Qualifies as a Dependent on Taxes?

Deciding if Someone Qualifies as a Dependent on Your Tax Return

How Do I Know if I Can Claim Someone as a Dependent?
To start, there are a few basic requirements that need to be met to claim someone else as a dependent:

No one else can claim you, or your spouse if you’re filing a joint return, as a dependent. Even if the person chooses not to claim you as a dependent, the fact that they could makes you ineligible.
You generally can’t claim anyone who is married and files a joint return. However, there are exceptions if the person only files a joint return to get back income taxes that were withheld from paychecks or estimated tax payments.
The person you’re claiming must be a U.S. citizen, resident alien (which can include undocumented residents), U.S. national, or resident of Canada or Mexico. There are also some exceptions for adopted children who lived with you in the U.S.
These general rules apply to everyone. Additionally, the person you’re claiming must meet all the requirements to be your qualifying child or qualifying relative.

The Two Types of Qualifying Tax Dependents
Children and relatives can qualify as tax dependents—but their definitions are broader than you may suspect.

In addition to your birth child or an adopted child, your foster child, siblings, half-siblings and step-siblings (along with all the siblings’ descendants) can be qualifying children. And your son-in-law, mother-in-law, parents, grandparents and in-laws could all be qualifying relatives.

A person doesn’t even need to be a relative to count as a qualifying relative. A girlfriend, boyfriend or roommate could be your dependent as long as the person is a member of your household for the entire year and meets all the other requirements.

The IRS’ Publication 17, chapter 3, has a complete list of which relationships can qualify someone as a child or relative for dependent purposes.

In addition to the relationship requirement, the qualifying child or qualifying relative has to pass a series of “tests.”

Qualifying Children
There are four tests for qualifying children:

The child must be 19 or younger at the end of the tax year and younger than you (and your spouse if you file a joint return). Qualifying children can be up to 24 years old if they’re also full-time students for at least five months of the year, or they can be any age if they’re permanently and totally disabled.
The child has to live with you for at least half the year. There are exceptions for temporary absences, such as when you or the child are away from home for school, business, vacation or military service.
The child can’t provide more than half of his or her own support during the year (scholarships don’t count as support).
The child can’t file a joint tax return unless the only reason for filing is to get back the taxes that were withheld from his or her pay or were part of estimated tax payments.
The rules for who can claim a qualifying child can get fairly complex when both parents can claim the child as a dependent but they aren’t married, or they file their tax returns using the married filing separately status.

Some parents switch off, letting one person claim the child one year and the other parent claim the child the next. The IRS also has an official series of tiebreaker rules (see page 30 of Publication 17) to determine who can claim the child if you can’t come to an amicable agreement.

Qualifying Relatives
There are three additional tests for your qualifying relatives:

The person can’t be anyone’s qualifying child.
The person’s gross income must be below $4,150. Income could include money, property, goods or services they received, and it may include Social Security benefits. However, there are exceptions for people with disabilities who received income from certain tax-exempt schools.
You have to provide more than half of the person’s support for the year.
If working through all the tests sound like too much work, you could also try the IRS’ interactive tool, which can help you determine if you can claim someone as a dependent.

DISCLAIMER: Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular
circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation. 

Have further questions?  Please contact our office and make an appointment.

7 Tax Deductions Self-Employed Workers Shouldn’t Overlook

7 Tax Deductions Self-Employed Workers Shouldn’t Overlook

Self-employment can bring more flexibility, but often it brings more pressure as well. You are both employee and employer, which means you can set your own hours and decide which projects you feel like taking on. It also means that if you don’t have any cash flow coming in, there’s no one to blame but yourself.

As taxes can get more complicated as self-employed, you must pay them quarterly and you owe a lot more in Social Security and Medicare tax, which in traditional jobs is split between employee and employer. But there is one big plus to being a self-employed person around tax time, and that’s all the deductions you can claim to lower your bill. Here’s a look at 7 that you don’t want to miss out.

1. Home office deduction
The home office deduction is one of the most popular self-employed tax breaks and also one of the most abused. You’re allowed to deduct expenses like electricity, heating, property taxes, and even your homeowners insurance as they relate to your home office. So if, for example, your home office takes up 10% of all the square footage in your home, you could deduct 10% of all the bills listed above as business expenses.

The big catch here is that you can only deduct home office expenses if that room is solely or primarily used for business. You cannot consider your living room as your home office just because that’s where you work from. You probably use it just as much, if not more, for personal purposes so it would not qualify as a deductible expense.

2. Self-employment tax deduction
Everyone pays Social Security tax and Medicare tax, as mentioned earlier. Social Security tax is 12.4% of your income and Medicare tax is 2.9%, for a total of 15.3%. You’re only responsible for half of that when you have an employer. Your company pays the other half. But when you’re self-employed, you must pay it all on your own.

The good news is that the government enables you to write off half of what you pay in these taxes (your employer portion) so you don’t have to pay income tax on this amount. This puts self-employed workers on an equal footing with traditionally employed workers.

3. Travel expenses
Whether driving to see a client in your local area or flying across the country to attend a conference, you can deduct any travel expenses you incur on behalf of your business. This includes flights, rental cars, hotel stays, and even ride-sharing fees. If you’re driving your own vehicle, you can deduct 58 cents for every mile on your 2019 tax bill. In 2020, this drops to 57.5 cents per mile.

The government isn’t just going to take your word on these expenses, so keep documents to prove what you spent. The same goes for the home office deductions you plan to claim above: Keep receipts or else the government could disallow them if it audits you.

4. Office supplies
Simple things like paper and pens, all the way to expensive pieces of equipment you buy for your business, can be tax-deductible, as long as you use them primarily for business and you keep all receipts to prove your expenses. Go back through your bank and credit card statements for the last year and note any business-related expenses you may have forgotten about. Highlight them or record them on a separate sheet of paper so you have all the numbers you need when you’re ready to file your return.

5. Professional education
Attending conferences, taking a professional development course, or pursuing an advanced certification to improve the quality of service you offer your customers are all deductible expenses as long as they relate to the business you’re currently running and you have the documents to prove your expenses.

Courses to help you branch out into a new, unrelated business wouldn’t count, though. It’s fine to write off a course in graphic design if you’re already a graphic designer, because it can help you improve your skills and the services you offer. But if you run a bakery and just decide to take a graphic design course on a whim, you can’t count this as a business expense.

6. Advertising
Paid advertising, like ads online or a TV or radio commercial, is a deductible business expense. The same goes for maintaining a business website and any billboard space your company pays for. Keep track of how much you spend on advertising throughout the year and hold on to those receipts.

7. Health insurance premiums
Self-employed workers don’t have an employer to help them cover the cost of their health insurance, so the government enables them to write off their premiums. This only applies to health insurance that you’re paying for on your own. If you get health insurance through your spouse’s company, you cannot write this off even if you’re self-employed. But you can write off premiums for yourself, your spouse, and any dependents if you pay the full cost of the health insurance premiums yourself.

This isn’t a comprehensive list of all possible self-employed business deductions, but it should give you a sense for what you can and cannot write off. Only expenses that are primarily or solely for your business are tax-deductible and you must have documents to prove all of these deductions.

And remember this list as you move into 2020, so you can start keeping records of all tax-deductible expenses to make next year’s tax season go much smoother.

Tax scams are in full swing. Here’s how to protect yourself

Tax scams are in full swing. Here’s how to protect yourself

  • “Don’t ever give out personal information to anyone you don’t know over the phone.”
  • The IRS will never make initial contact with taxpayers via an unsolicited phone call or e-mail. (The agency generally only contacts people by mail.) It doesn’t call about unexpected refunds, ask for personal information like credit or debit card numbers over the phone or make threatening payment demands. If suspicious, taxpayers can request that the caller send a letter.
  • Beware of e-mails or other communications posing as the IRS, promising a big refund or personally threatening you. Don’t open attachments or click on links in suspicious e-mails.
  • If a tax refund promised by a tax preparer seems too good to be true, it probably is. Ask some questions: Why is the refund coming out this way? Why am I getting such a large refund?
5 Ways that the Federal Income Taxes Will Be Different in 2020

5 Ways that the Federal Income Taxes Will Be Different in 2020

​1. No individual mandate penalty
Most of the tax code changes stemming from the Tax Cuts and Jobs Act of 2017 took effect in 2018. One exception is the change to the shared responsibility payment, which took effect in 2019.

The shared responsibility payment — commonly referred to as the individual mandate penalty — had applied to folks who were required to have health insurance under the Affordable Care Act but who didn’t get coverage and didn’t qualify for an exemption.

If you owed the penalty, it was due when you paid your taxes.

Starting with 2019, however, there is no longer a penalty. So, folks who didn’t have health insurance in 2019 will not owe the penalty when they file their taxes in 2020.

2. No alimony deduction
Elimination of the alimony deduction is another Tax Cuts and Jobs Act change that took effect for tax year 2019 rather than 2018. For divorce and separation agreements made or modified this year or thereafter, alimony payments will not be deductible, says IRS Publication 5307.

So, a spouse who got divorced this year and paid alimony in 2019 cannot write the payments off on a tax return in 2020. That also means that a spouse who got divorced in 2019 and received alimony this year cannot count the payments as income.

3. Higher Health Savings Accounts contribution limits
Health savings accounts are another type of tax-advantaged account for which the contribution limits generally increase as the years roll along.

HSAs are not strictly for retirement savings, although you can effectively use them as retirement accounts, as we explain in “3 Reasons to Get a Health Savings Account.”

The 2019 contribution limits for people who are eligible for an HSA and have the following types of high-deductible health insurance policies are:

Self-only coverage: $3,500 (up from $3,450 for 2018)
Family coverage: $7,000 (up from $6,900)

4. Higher standard deductions
Standard deductions are somewhat higher for tax year 2019 on account of inflation. The IRS reports that they are:

Married filing jointly: $24,400 (up $400 from last year)
Married filing separately: $12,200 (up $200)
Head of household: $18,350 (up $350)
Single: $12,200 (up $200)
The standard deduction reduces the amount of your income that’s subject to federal taxes. So, if a married couple filing a joint tax return are eligible for and choose to take the standard deduction on their 2019 return, they would not be taxed on the first $24,400 of their taxable income from 2019.

5. Higher income brackets
Income tax brackets are also somewhat higher for tax year 2019 than they were for 2018 on account of inflation.

The IRS reports that the tax rates and corresponding income brackets for 2019 are as follows for folks whose tax filing status is single:

37% tax rate: Applies to incomes of more than $510,300
35%: More than $204,100 but not more than $510,300
32%: More than $160,725 but not more than $204,100
24%: More than $84,200 but not more than $160,725
22%: More than $39,475 but not more than $84,200
12%: More than $9,700 but not more than $39,475
10%: $9,700 or less

2020 Tax Season Dates

2020 Tax Season Dates

2020 Tax Season Dates

Alright, it’s time bust out your calendars and circle some important dates so that you won’t make the mistake of waiting until the last minute to file your taxes.

While Tax Day isn’t until April, waiting until then is a recipe for disaster. Not only is waiting until April 15 more stressful than going Xmas shopping on Christmas Eve, but you’ll miss out on some of the benefits of filing your taxes early.

With that in mind, here are some important dates to keep in mind as tax season rolls around:

  • Late January 2020: The IRS hasn’t confirmed a specific date yet, but this will be the official start of tax season—the day the IRS begins accepting and processing your 2019 tax returns. So, if you have all your tax forms and information in order by then, you can get your taxes out of the way before the snow in your front yard melts.
  • January 31, 2020: You should have online access to your W-2 form—the form employees use to report their income—or have it delivered to you by your employer by this date. So, check your mailboxes! If you did freelance or contract work for a business or client, then you might get a 1099-MISC form that you’ll use to report your self-employment income. If you haven’t received your forms by the end of January, reach out to your company’s HR department to get that sorted out.
  • April 15, 2020: This is the dreaded “Tax Day”—the day your 2019 income tax return is due to Uncle Sam. It’s also the last day to request a six-month extension if you need more time to file your taxes. But an extension to file is not an extension to pay—you still need to pay the IRS what you owe in taxes to avoid paying a late penalty and getting charged interest on your unpaid taxes.
  • June 15, 2020: If you live overseas or you’re on military duty outside of the United States, your taxes are still due on April 15—but you’re given an automatic two-month extension to file your taxes (without needing to request one). However, if you file later than April 15, interest will be charged on the taxes you owe starting from April 15.
  • October 15, 2020: Got a six-month extension to file your 2019 taxes? This is the deadline to file those tax returns.

What if you’re self-employed and pay quarterly taxes (or estimated taxes) throughout the year? Here are the deadlines for your 2020 estimated taxes:

2020 Quarterly Tax Deadlines

First Payment April 15, 2020
Second Payment June 15, 2020
Third Payment September 15, 2020
Fourth Payment January 15, 2021
IRS Announces 2020 Mileage Rates

IRS Announces 2020 Mileage Rates

The Internal Revenue Service (IRS) issued the 2020 optional standard mileage rates used to calculate the deductible costs of operating an automobile (including vans, pickups and panel trucks) for business, charitable, medical or moving purposes.

Beginning January 1, 2020, the standard mileage rates are:

57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
14 cents per mile driven in service of charitable organizations.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than five vehicles used simultaneously.

 

Tax Tips for 2020 and Beyond

Tax Tips for 2020 and Beyond

Tax season is just around the corner. It’s not something most of us enjoy thinking about or dealing with — indeed,  16% of respondents to an AARP survey said they’d rather spend a night at the airport than prepare their taxes, while 36% would just as soon visit the DMV.

If you approach tax season prepared, though, and you’re able to shrink your tax bill via some savvy moves, then maybe it won’t be so bad. Here are five valuable tax tips you can use in 2020 and in the years ahead.

Tip No. 1: Be organized

It’s a little late to do a great job with this tip, but it’s not too late. Ideally, have a folder or box where you place tax-related receipts and documents throughout the year. (After all, you might spend some money on a tax-deductible medical expense in May — and you don’t want to forget about it.) Once you’re sitting down to prepare your return, all the papers you need will be in one place. Even if you’re using a tax professional to prepare your tax return, it will be very helpful to be able to hand over all your necessary documentation instead of having to hunt for it.

Tip No. 2: Take advantage of IRAs and 401(k)s

It’s vital for most of us to be saving and investing for retirement, and it’s very helpful to do so using tax-advantaged accounts such as IRAs and 401(k)s.

There are two main kinds of IRAs and 401(k)s: traditional and Roth. Traditional accounts offer an up-front tax break: You contribute money on a pre-tax basis, thereby reducing your taxable income for the year of the contribution. If you contribute, say, $5,000, you deduct that from your taxable income and avoid paying taxes on it. With a 24% tax bracket, you could shrink your tax bill by $1,200.

Roth accounts offer a back-end tax break: You contribute money on an after-tax basis, so your taxable income isn’t reduced and your tax bill for the year of contribution doesn’t shrink. But, if you follow the rules, when you withdraw money from the account in retirement, it will be tax-free income.

Tip No. 3: Keep up with changes to tax laws

Next, it’s important to keep up with developments in tax law. Otherwise, you might not realize that the amount you can contribute to various accounts has changed or that certain deductions are no longer allowed. Some years offer more changes than others — the Tax Cuts and Jobs Act of 2017 ushered in lots of change, such as doubling the standard deduction and reducing various tax rates — rules that are in effect now, for your 2019 tax return that you’ll prepare in 2020 and for future years.

Tip No. 4: Be thorough and report all your income

It can be tempting or easy to omit some income when preparing your taxes — if only because you forgot some income. That can be a costly blunder, however, and one that can be prevented if you’re organized and keep good records of all your earnings. You might have a small job on the side, for example, or you may be earning a little extra income making and selling things online.

Many sources of income will send you end-of-year documents, such as the W-2 form from your employer or 1099 forms from your bank and/or brokerage detailing income from sources such as dividends or interest. That information also makes its way to the Internal Revenue Service, which is expecting you to report it. Failure to do so will likely be noticed.

Tip No. 5: Consider hiring a tax pro

Finally, because tax laws are so complicated and subject to change, consider not preparing your tax return on your own. If your situation is very simple, such as if you’re single, with no dependents, no investments, and no income other than a salary, you could do well to use a tax preparation software package.

But those with more complicated financial lives should consider using a good tax pro’s services. After all, he or she spends a lot of time keeping up with tax laws and knows about available strategies that can minimize your taxes. But don’t just sign up with a stranger at a kiosk you run across — ask for strong recommendations from friends or family or look into nearby enrolled agents (those who are authorized to represent you before the IRS) and interview a few before selecting who to hire.

Need more info or need a question answered? Feel free to contact us and give us a call.