People are now beginning to get their W2s and other income tax related documents as tax season gets into full swing.
Certified Public Accountant Carlos Martin, with Jamieson, Wise and Martin, says no major changes were made to tax law in 2015.
“That’s generally good news, meaning taxpayers don’t have to worry about how new laws might affect them,” he said. “However, Congress did manage to make some relatively small tax changes.”
A new form taxpayers need to look for is form 1095, which shows the health premiums paid during the year and the months that were covered. Martin says an uninsured household of three or more could face a penalty of $975. This is for minimal essential medical coverage, he said.
New tax deadlines are in place for 2016 due to Emancipation Day, which falls on April 15.
“Federal law mandates that any holiday in the nation’s capital also applies to offices there, and that pushes the usual due date for annual 1040 filings to Monday, April 18,” he said.
Martin also gave a few tips for the average taxpayer:
- If you use a tax preparer, be sure and review the return before signing the form allowing them to e-file your return. You are signing that you agree with the information. You need to make sure there are no misunderstandings in your income or deductions.
- You should receive W2 forms for wages, 1099 forms for dividends, retirement, stock sales and miscellaneous earnings where you are contract labor. Remember, even if you don’t get a tax form and received the money, it is still taxable.
- IRA and Health Savings Account deductions. You have until April 15 to make contributions to your regular IRA and still take a deduction on your 2015 tax return.
“Ultimately, there is no universally correct answer to the question of hiring a tax professional or doing your taxes yourself with software,” Martin said. “Your comfort and familiarity with IRS rules will be part of your decision, but the complexity of your finances should be the key deciding factor.”
Ty Pendergrass, of Argent Financial, says those with portfolios and investments should have a 1099 with their earnings and interest.
“Those will come in the coming weeks, and they will need to input that data on their tax forms,” he said. “Typically, on the 1099, it’s going to identify the income created on the investments characterized as ordinary income or qualified income, which means dividends from corporations. Those dividends are taxed differently than ordinary income.”
He explained the difference between the two, saying qualified income is the dividends while ordinary income is wages and interest.
He says the taxpayer also needs to know his or her tax cost basis before they file, adding this is important for people who have sold timber or have capital gains.
Pendergrass says those with investments will need to have on hand their 1099s, their contributions to IRAs for individuals and certain retirement plans up to the time they file for 2015.
“Being organized, with your W2s, 1099s, property taxes, etc., the easier it’s going to be to prepare your taxes,” he said. “If you use a professional preparer, the better organized you are, the less expensive it’s going to be.”