Tips for tax filing: What you should know
doug mueller, president, mueller prost cpas + business advisors
Many filers don’t take advantage of medical expenses because they need so many of them to exceed 7.5 to 10 percent of their adjusted gross income to even get their first dollar of medical deduction. However, what they overlook is that assisted living may qualify as a 100 percent medical deduction if you are chronically ill. That can equate to big dollars with the high cost of today’s assisted living. Also, student loans in a child’s name that parents pay are not a valid deduction for Mom and Dad. These are deemed a gift to the child, but the interest that was paid on that loan can be a deduction for the child as long as the child is no longer claimed as a dependent. He or she can deduct up to $2,500 of the student loan interest paid by the parents each year, even though the student can’t itemize on their tax return.
marvin miller, president & ceo, compass retirement solutions
If your employer offers a 401(k) or other type of deferred pension plan, make every effort to contribute the maximum amount allowable—especially if your employer matches your contribution. Otherwise you are leaving money on the table that could benefit you in your retirement. Think of the employer match as an immediate, 100 percent return on your money. Even if there’s no match, all the funds are tax-deferred and grow tax-free. If your employer does not offer a retirement plan, consider making a contribution to a traditional individual retirement account or Roth IRA. The former potentially offers a tax deduction for the year the contribution is made, but both offer tax-deferred gains. Check your year-to-date withholding and consider changing the taxes withheld if you are expecting a large refund. This is especially important if you are claiming the earned income tax credit, or EITC, or the additional child tax credit. Why? The IRS is now required by law to hold all refunds on those returns until Feb. 15. The new law was put into place to allow the agency additional time to detect and prevent tax fraud. You will need to complete Form W-4, the Employee’s Withholding Allowance Certificate, to adjust the amount of taxes withheld, and submit it to your employer.
william alverson, cpa
If you sold your home in 2016, remember to deduct your prorated real estate taxes from Jan. 1, 2016, through the date of closing. You can find this amount on your closing statement. Your mortgage interest statement will not have this amount if you sold your house prior to the date your real estate taxes usually are paid. Many of my clients have missed this deduction in the past, but you can amend your return to include this deduction if the sale occurred anytime in the previous three years. If you are currently operating a business as a sole proprietor, consider obtaining an LLC through the Missouri Secretary of State website and then electing to be taxed as an S corporation. It might sound complicated, but a qualified tax professional can walk you through the process or do it on your behalf. The eventual tax savings can be significant!