The first step in preparing your taxes should always be to get organized. Gather all your W-2’s, 1099’s and any pertinent receipts, especially for charitable contributions.
“You really need to have either a receipt or a cancelled check or even a credit card if you make contributions by credit card. But if you give a charity over $250 they should give you documentation and you should keep that as part of your permanent tax file,” said Founder and Owner of Foley Law and Tax Group, LLC, John Foley.
It’s also good to look back at last year.
“I think it’s always helpful when you’re organizing your tax information for the current year, look at the last couple years and see if there’s anything missing,” said Foley.
And, as President-elect Donald Trump’s tax plan could bring many changes next year, it’s also smart to look ahead.
“We’re anticipating a very substantial change in a lot of areas. So anticipating those changes compared to what we have now, has been a great focus for our practice so far this year,” said Foley.
Some of the proposed changes include reducing the top tax bracket from 39.6 to 33 percent, repealing the net investment income tax and increasing the standard deduction.
While none of these are official, they could affect how you do this year’s taxes.
“There may be some taxpayers out there whose itemized deductions are between what the standard deduction is now, and what it may be under Trump’s new tax plan, so in that case, they would be better off accelerating those itemized deductions into 2016, to get the most bang for their buck, and then just taking the standard deduction next year,” said Foley.
Another tip: defer income if you can, as it could be taxed less next year.
“When it comes to like a capital gain transaction, selling a stock or a bond, selling this year versus next year, you might pay a lot less tax on that same transaction next year,” said Foley.
And Foley’s biggest tip: get started now.
“If you go into the end of the year with your eyes open versus you eyes closed, you may be able to capture some tax benefits if you have the ability to shift things,” said Foley.
Foley recommends keeping all tax documents for seven years, and then shredding them.
Naperville News 17’s Evan Summers reports.
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