Beach Blanket Bingo: Tax Style

July, 14 2015 by Jean Lee Scherkey, EA

It’s finally summer. Just as you are about to hit the road to your favorite summer get-a-way, a faint memory of Uncle Sam emerges. You quickly remember you hit the snooze button on preparing your 2014 return in April and filed an extension. As you put the chips and salsa in the car, scenes of the movie Groundhog Day replay in your mind. Except it’s not Bill Murray playing the title role - it’s you! As the scene begins, it is 11:00 pm on October 15^th. You’re at your dining room table, finishing off your second bottle of wine. As your mascara runs from your tears of frustration, you say to yourself, “Never again!” Not quite sure if you overstated your income or understated your deductions, you hit the “e-file” button as the clock strikes midnight… A shiver runs down your back. You feel torn, trapped between the summer fun and the terror of your tears muddling the Syrah on October 15^th. My fellow procrastinators, fear not - for you can catch the waves and finish your taxes in style, too!

The summer months are a great time to get your tax life in order. If you work at it here and there, it will seem like you spent your summer basking in the sun. But when you sit to prepare your tax return in October, you will have the time to enjoy that bottle of wine with friends and family, instead of with your keyboard and Form 1040. Here are some tips to get started! 

• The Ten-Minute Sort: Set a timer for just 10 minutes and begin sorting your 2014 tax papers. At the end of 10 minutes, you can stop. Remember, the goal is not to become overwhelmed.


• Start by looking for any official tax documents, such as your W-2s, forms 1099-R, Forms 1099-INT, 1099-DIV, 1099-B, etc. If you see a form titled “Schedule K-1,” put it in this pile as well, as the information listed on it will need to be reported. If you are missing any documents, now is a good time to request replacement copies.


• Gather your monthly bank and credit card statements and highlight any deductible payments, such as real estate property taxes, medical bills, charitable contributions and personal property taxes.


• If you own your home or did any major home improvements, pull these receipts and file them with your permanent home documents. When you sell your home, you will need the receipts of all major home improvements, as these expenditures will increase the basis, which is generally the purchase price if you bought your home.


• If you made estimated tax payments during the year, double-check your bank statements to be sure each of the payments cleared. Many times taxpayers forget to enter their estimated tax payments on their return or assume they made estimated tax payments when none were actually made.


• Remember that guy you met right out of school, and you just knew he was your soulmate after two dates? At the same time you wrote his name on your heart, you also listed him as the beneficiary of your bank accounts and insurance policies. But now may be the perfect time to review who is listed as the beneficiary of your financial accounts and insurance policies - and then make changes as needed.


• For those of you who are self-employed, begin gathering all your business income and deductions. If it appears you will have net self-employment income, you may want to make an appointment with a local tax practitioner to discuss if opening a SEP-IRA may be right for you. A SEP or “Simplified Employee Pension” plan is the only retirement plan available where self-employed persons with net Schedule C income may open and make retirement contributions for the prior year as late as October 15^th.

Summer is about leisure and having fun. No one wants to spend it chained to a mountain of paperwork - so start taking baby steps now! You will be amazed at what you can accomplish in just 10 minutes.