Happy New Year! As we come to the end of one year and the beginning of another, we are reminded that tax time is just around the corner. We are hopeful that the following information will be helpful in your preparation. We highly recommend that you keep this with your tax information and share it with your accountant. If you are doing your taxes on your own or with a person who is not a professional accountant, we will do our best to help, but we are limited by liability from giving tax advice. If you are not proficient in doing your taxes with software or online, we highly recommend that you work with a professional.
1099’s – In the past, we normally expected that 1099’s should arrive to you by mid-February. However, in the last few years, this has not been the case. Our hope is that you receive all of these by the end of February, but we have no control over this, nor can we control that some companies may issue 1099’s and then send corrected 1099’s weeks later. If you have taken withdrawals from your IRA’s or similar tax-deferred accounts, you will receive 1099R’s. If no withdrawals have been made, you will not receive 1099’s on these accounts. Be sure that you are in possession of all of your 1099’s before you meet with your accountant. Many issues that arise from your taxes are tax issues and not investment issues. It is also helpful to have your accountant compare your 1099’s to those from previous years to be sure nothing is missing. This is particularly important if you are working with someone new. Use your last year’s return as a guideline. Expect your accountant to do the same. If there is a missing 1099, they should ask where it is or if the account has been replaced. We have no way to know what you have provided to your accountant, but this way they will know what you should provide.
Cost Basis – If you have sold securities during the year, you will see these reflected on a 1099B. You will need to provide cost basis information to your accountant for these trades. This means that you will need to know what you paid for the shares and the dollar amounts of the capital gains and reinvested dividends, if there are any. Without this information, you could be paying too much in taxes on these trades. We also know that many of you will need financial statements for college and other government programs at this time of year. We will be happy to help you with advance notice.
Please do not call us from your accountant’s office assuming that we can provide this information while you are there. It is important that you do not wait until the last minute to file your return. If you need us to provide you with account information, it may take up to 10 business days.
Data Collection – Please see that your accountant provides you with a data collection list or questionnaire to be sure you have provided everything, as well as to be sure that you have not missed any possible deductions. Many mistakes on tax returns are ones that cause you to pay higher taxes.
Our Services – We can only provide you with information for accounts that are currently under our management. A fee will be charged for us to do research on accounts that we do not manage or control. As we are not accountants, we cannot answer specific accounting questions for your tax return. We do have accountants on our team that we would be more than happy to introduce to you. If you would like us to review your return after it is completed, or to work along with your accountants, we would be glad to do this on a fee basis.
Electronic Filing – If your return is filed electronically, we highly recommend that you review it before it is transmitted. We have had clients in past years who received their returns, wanted to make IRA contributions to reduce their taxes, or had additional information for their returns, but discovered that the tax preparer had already transmitted their return electronically before they received their copy to review. To avoid this, simply ask the tax preparer to wait for you to review the return before it is filed.
Retirement Plans, IRA’s and possible other deductions – Before you submit your return, be sure that you have taken advantage of all IRA tax laws. There are higher limits today than in past years and additional potential tax savings. Ask your accountant to calculate what this could mean for you, as you can make 2015 contributions up until April 15th of 2016. If you are making an IRA contribution for 2015, we recommend that you mail your contribution by April 10th. However, contributions mailed directly to the investment can be made if they are postmarked by midnight on April 15th. If you do not take advantage of these for this tax year, the opportunity will pass and you cannot go back. There are also very good reasons to add to Roth’s and non-deductible IRA’s, including doing them for supplemental education planning. If you made contributions to a 529 plan for education, these may be state tax deductible. Please let your accountant know your contribution amount.
Deducting Investment Fees – Some investment and management fees are tax deductible. Please mention this to your accountant to see if you qualify.
As always, we are here to assist, so please feel free to call or email us for additional information. You may also have your accountant contact us directly. We often speak the same “language,” and this can simplify many issues.
One final word of advice: we highly recommend that you do not spend your refund until you receive it; nor do we think it is wise planning to request a cash advance of your refund amount.
May 2016 bring you happiness and prosperity as we look forward to working with you throughout the New Year.
The Musuneggi Financial Group