So, in part 1 of this blog post, I explained how I file my paperwork all year for my taxes so I’m not scrambling for it in January for my tax man. In this part, I’m going to give you a little more information on exactly what paperwork you will need and some of the most used deductions. Disclaimer here, I’m not a CPA or tax professional this is just what I’ve learned on my own and from my tax preparer and if you don’t’ own your own small business you can ignore the third part.
FIRST – WHAT YOU WILL NEED FOR INCOME TAX PREPARATION
- Copies of W2, 1099’s and K-1 Forms
- Yearend mortgage statements
- Closing escrow statements on all real estate transactions for the year
- All 1099 forms reporting unemployment benefits, state tax refunds, HSA distributions and Social Security Income benefits
- Brokerage Statements for stock and bond transactions (Buy and Sell)
- Records of estimated tax payments to IRS and Franchise Tax Board
- Social Security income numbers for any new dependents
- List of higher education expenses including student loan interest
- Foreign Bank account information if a $10,000 or more value
Before I get into what you can deduct I want to share with you the IRS standard deductions this year for filing your 2018 taxes.
- If married with joint returns the minimum is $24,000.00
- If you file head of household it’s $18,000.00
- All others returns are $12,000.00
If your totals do not meet those minimums you can file the short form and not have to itemize we’re going to talk about.
SECOND – WHAT YOU WILL NEED FOR PERSONAL EXPENSES FOR TAX PREPARATION
- Moving Expense Deductions – these are deductible only if you were forced to move/relocate for a job that is at least 50 miles from your old place. If it is you can deduct the moving expenses including transportation, lodging and even storage and shipping.
- Medical Home Improvements – if you have to make improvements to your home to accommodate a disability or medical condition – like wheelchair ramps – you can deduct for those improvements.
- Property Taxes – You can deduct your property taxes. You may have to get that information from your lender if they are including those in your monthly payments.
- Accidental Losses – Casualty, disaster or theft losses can be deducted if appropriate, meaning getting a break on damage or loss could be helpful when budgeting for restorations.
- Rent Out Home, Repair deductions – If you own a second property that you rent out you can deduct the cost of repairs to your rental property and then depreciate those improvements.
- Energy Efficiency Upgrades – You can deduct a one-time credit for 30% of the cost of any solar, geothermal, wind or fuel technology you’re adding to your home. That 30% even applies to labor and installation too.
- Medical Expenses – Deductible medical expenses have to exceed 7.5 percent of your adjusted gross income to be claimed as an itemized deduction for 2018. That goes up to 10 percent in 2019.
THIRD – WHAT YOU WILL NEED IF YOU HAVE A SMALL BUSINESS FOR TAX PREPARATION
- K-12 Educators – The IRS allows qualified K-12 educators to deduct up to $250 for classroom materials – it gets deducted from your income.
- Supplies – You can fully deduct the cost of items used in your business like computer toner and ink as well as postage.
- Depreciation – This is an allowance for the cost of buying property for your business. Certain limits apply so take this with you and ask your tax preparer.
- Rent on business property – The cost of renting space – an office, storefront, factory or boutique is fully deductible.
- Utilities – Electricity for your facility is fully deductible. You can also deduct your cell phone charges if used for the business. If you claim a home office deduction and still have a landline the cost of the first landline for your home is NOT deductible but the second line is a utility cost.
- Taxes – You can deduct licenses, regulatory fees and taxes on real estate and personal property.
- Insurance – the cost of your business owner’s policy, malpractice coverage, flood insurance, cyber liability coverage and business continuation insurances are all fully deductible.
- Repairs – as with your personal taxes the cost of ordinary repairs and maintenance are fully deductible although costs to add to the property’s value are usually capitalized and recovered through depreciation.
- Commissions and fees – are fully deductible and may require you to report them on a 1099 – MISC form.
- Travel – If you or your staff members travel out of town on business the cost of the transportation (airfare) and lodging is fully deductible. There are some requirements from the IRS so check with your tax preparer.
- Advertising– Ordinary advertising costs are fully deductible.
- Home Office – a portion of a home are deductible as a business expense if the home is used regularly and exclusively as the principal place of business, a place to meet or deal with clients or customers or as a separate structure used in the business. The deduction includes both direct ( like painting a home office) and indirect costs (the percentage of the rent or mortgage interest and real estate taxes that reflect the percentage of business use of the residence.
- Legal and Professional Fees – Legal and accounting fees are fully deductible.
- Meals and Entertainment – Starting in 2018 entertainment costs are no long deductible but meal expenses incurred while traveling away on business remain 50% deductible. Half is on you and half on the IRS.
- Rent on machinery and equipment – Fees paid to lease or rent used in your business are fully deductible.
- Interest on business debts – This changed in 2018 and is very detailed and complicated so check with your tax preparer again on this one.
- Employee benefit programs and qualified retirement plans – If you have employee programs such as education assistance and dependent care assistance as well as contributions to employees qualified retirement plan accounts is deductible. For those of us who are self- employed, contributions to your own qualified retirement plan accounts are personal deductions on your 1040.
- Mortgage interest – Businesses that own realty can fully deduct mortgage interest.
That’s a lot of information but I hope it’s helpful for you so you can be fully prepared when you meet with whoever prepares your taxes.
Did you know that I can help you get all this organized for you, either virtually where I walk you through it on a program like Skype or you can send me a business box of your paperwork and I’ll go through it and organize it for you. I’ll send it back to you all organized with a listing of exactly what is there. I’ll shred/destroy anything that you don’t need to save any longer so the box you get back will not only be organized but it will be a lot lighter! I’m HIPAA certified and am bonded so you don’t have to worry about anything that is confidential.
For an additional fee I will also scan all the organized paperwork that I’ve returned to you and save it on a flash drive that will also come back to you with that box. Just remember my disclaimer – I’m not a CPA or Tax Preparer but I am a trained professional paper organizer so I can organize your paperwork but not prepare your taxes for you and all the information above is from my personal research and could be subject to change from the IRS. Just click here to contact me and get more information on how to send me your paperwork to organize. https://cherylosler.com/contact-cheryl/
If you missed Part One of this series, you can read it here: https://cherylosler.com/your-tax-paperwork/
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