Tax Tips from a Pro

With income tax season in full swing and the April 18 deadline looming, area residents are gathering receipts and crunching numbers in an attempt to either fill out their tax forms themselves or have a professional do the job for them.

According to Donny Everhart of , there are some things that people need to be aware of when tax time rolls around, which includes self-employed individuals making sure they document everything.

“The IRS is really clamping down on home-office deductions,” Everhart said. “Make sure all your deductions are legitimate. If you have a home office you can deduct utilities and home expenses.”

He added another thing to watch out for is how mileage is tracked.

“Make sure that when you go anywhere, you always write down the miles, destination, date and time,” he said. “That way if you are ever audited, you can show the IRS your records.”

For those who have children there are deductions available and according to Everhart, daycare expenses are deductible. He cautions to make sure you get a receipt with tax information from the daycare provider when the service is paid for. In addition, parents can also receive a child tax credit.

When it comes to owning vehicles, Everhart said license fees are also deductible. But it’s not just license fees that are deductible – retirement plans also can be a tax benefit.

“I always check to make sure people are maximizing their 401K,” he said. “If you are putting money into your employee sponsored plan, that is a tax deduction, it comes out pre-tax. You could actually put money away but it wouldn’t actually make a big difference in your paycheck. Even if you are covered by an employee-sponsored plan you can still put money into either an IRA or Roth IRA and save for your future. If you do not have the employees sponsored plan, you definitely want to make sure that you put money into IRA and you have until the tax filing deadline to put money into an IRA. So you could put money in now and claim it as a tax deduction on your taxes for last year.”

Everhart added when clients do come to a tax preparer they need to be sure to bring in their W2, any 1099’s, a 1098 if they own a home because property taxes are tax deductible and mortgage interest is tax deductible. People also need to bring in dividend statements if they sell any investments such as stocks, mutual funds or bonds.

“That’s why it’s so important to purchase a home,” he said. “I strongly recommend it because you can pay $1100 in rent or $1600 for your house payment but most of that house payment is interest which is tax deductible,” he said. “So with that tax deduction, you are basically buying the house with the same kind of money that you can rent for.”

He added first time home buyers also get a tax credit. For elderly filers, long-term care premiums are tax deducible.

“People on Social Security who make up to $18,000 or something like that, don’t have to pay taxes,” he said. “ So a lot of older people don’t have to pay taxes on that.”

For everyone, health care premiums are tax deductible. Everhart suggests that people create a health savings account because money can be placed in there pre-tax and then the money can be used to pay medical expenses so it is a huge tax deduction.

He also said any charitable donations are tax deductible but make sure you have the value of the items and the names of the charity.

In addition, sales tax for large purchases like boats and cars is deductible. Everhart said although there are good tax preparation programs available to consumers, going to a professional tax preparer can help them in the long run.

“People are always curious so they’ll go online and do some quick tax table or something like that and say, ‘Oh I owe this’ or ‘I’m getting this much back,’ so then they’ll come to me and when I do it the numbers are completely different and more often than not, much better then what they were expecting.” he said. “They do have some good programs out there like Turbo Tax. It’s good at helping consumers walk through doing their own taxes.”

But, he emphasizes, anyone who prepares a tax return should be well informed as to tax law changes from year to year.

For more information or to make an appointment call, Everhart at (707) 678-4600.