Perhaps the picture of the Tax Man is not as dramatic as that of the Roman soldiers flipping carts of peddlers in the market to collect their taxes on the spot. But the Tax Man still commands a healthy cosmic fear.
The arena is a mix of annual tax filings, audits, back taxes, tax liens, bank levies and wage garnishments. The pleadings for settlements ranging from an offer in compromise, begging for currently not collectible status and installment agreements are still knocking on the gates of the tax collectors. Perhaps they will give those under their mercy some respite.
For now the decks are cleared just for the droves of the tax filers. Some anticipate the years with fear they will owe money to the IRS, money they may not have. Some actually can’t wait for the Tax Man to open the gates to rush in and ask for their earned income credit that could be in the thousands. That credit is to some the only romantic rendezvous with money; a yearly ritual of breaking all the rules, for a hedonistic moment of spending and be happy.
Now on a more serious note, how can we prepare for this reluctantly anticipated moment of filing our income tax? Obviously the issues may be as many as there are taxpayers. I want to just touch on some general ideas. To bring some semblance of organization to our thoughts, let us just discuss both the individual and small business taxpayers.
Taxpayers with w-2’s only do not have much to worry about. Just to make sure to attach the w-2 to their tax returns. Taxpayers who have homes have other issues to contend with:
The word here is “not do” rather than “do” for most taxpayers. Do not bother to gather medical expenses unless they are above 7.5 % of adjusted gross income. So, if your adjusted gross income (and this is a very important number because many calculations depend on it; it is the last line on the first page of the tax form 1040) is one hundred thousand dollars and you have medical expenses totaling six thousand dollars, don’t bother, because you would not benefit from these expenses.
Property Taxes and Interest Expenses:
This is a straightforward item to look for. As soon as the bank sends you the annual statement you will have both numbers, unless you do not escrow. In this case you will have the tax total from the taxing authority. Make sure to include all the taxes such as the school district, the county, or any other taxes. Some people don’t know that and include only one type of taxes when they receive just one statement. Wait for all the statements. If you own a piece of land include the property taxes for the land as well.