Tips for the tax puzzle

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I am one of those people who finds taxes interesting. This is a good thing, since, as an Enrolled Agent, I prepare taxes for my clients.  Being interested in the topic helps keep my mind fresh as I focus on the many details involved with individual and small business taxes. Each tax return is a puzzle.  I love the feeling of fitting all of the pieces together.

Of course, with the big new changes coming to the U.S. tax code, many people are asking lots of questions about what those changes will mean for them.  We can find answers to some of these questions.  For others, we will need to be patient and wait for the IRS to issue guidelines, revise forms and sort out the details.

With all the excitement about what is to come, it is just as important to pay attention to what is going on right now.  Nothing much has changed with the rules for the 2017 tax year.  Soon we will begin to receive forms in the mail or by some other means (w-2, 1099, k-1, etc.).  Whether you prepare your taxes on your own or seek out professional help, there are things you can do now to take some of the stress out of the process for everyone involved.

Here are some tax tips for right now:

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1. Be Organized! 

This may be easier said than done, but everything you can do now to gather up all the important documents for the 2017 tax year in one place, the easier it will be for you or your tax preparer to accurately complete your return.  Create a file folder and start putting everything tax related into it.  This folder can be fancy or basic, solid or virtual, your options are endless.  The main thing is to get everything you need into one place!

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2. Itemized Deductions Require Documentation!

If you have expenses for things like mortgage interest, state and local taxes, charitable and medical expenses, you must keep good records.  If these expenses that are high enough to push you beyond the standard deduction ($6,350 single, $12,700 married filing jointly, $9,350 head of household), you will benefit on your 2017 tax return.  

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3. Did You Pay A Contractor? 

If you are a business owner or landlord and you paid more than $600 to a contractor or service provider, you may need to file a 1099-misc. 

If you paid a household service provider (nanny, housekeeper, caregiver, gardener, home chef, etc.) more than $2,000, you may be considered a household employer.  If so, you are responsible for the so called "Nanny Tax".

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4. It Is Not Too Late To Save For Retirement!

Most of your 2017 tax status is set in stone.  One of the few things that you may still have time to do to lower your 2017 taxable income is contribute to an Individual Retirement Account. Of course there are rules and income limits and different types of accounts to consider, such as Roth, Traditional and Self-Employed Retirement account options, so you need to dig into the details.