You are a weekend warrior. Whether weeding the lawn, paying Balderdash with the neighbors or binge watching Judge Judy, you live your life with gusto. So, why are you letting your unfinished 2015 tax return keep you from to venturing near your laptop? Don’t let those extension blues follow you this summer! Now is the time to pour a tall glass of your favorite beverage, break out your emergency stash of chocolates and brave that Form 1040 like the ninja you are. After all. you have three extra days this year to file, as the 2015 federal income tax returns are not due until April 18th (or April 19th if you are a resident of Maine or Massachusetts).
Sometimes the act of beginning a task is the hardest part, especially if the outcome seems scarier than riding a rollercoaster after participating in a competitive eating championship. Before firing up your tax software, it is important to take some time to gather your tax documents. Organizing your information now will save you an abundance of time later. In addition to gathering the usual income and expense documents (Forms W-2, 1099s, mortgage interest statements, property taxes paid, charitable contribution receipts, 1098-T tuition statements, etc.), you will need to gather the information regarding healthcare insurance coverage for yourself, spouse and any dependents claimed on your income tax return. Healthcare documents include Forms 1095-A, 1095-B, 1095-C and/or Marketplace Exemption Certificate.
Not to worry if your dog, cat or toddler ate any of your tax information. The majority of tax documents are available online at the payers’ websites. This includes online accessibility to form SSA-1099 on the Social Security Administration website and retrieving lost Forms 1095-A from the federal and state marketplace websites. Many state tax websites have 2015 income tax statements (such as Forms W-2) already available online. Generally, the IRS will not have prior year wage and income statements available online until around July of the following year.
Your documents are gathered, the beverage is poured and your chocolates are arranged like a battalion of soldiers heading for battle. A feeling of accomplishment and confidence begins to set in. But before deciding if your correct filing status is Single or Head of Household, there is another tool to add to your tax preparation arsenal. Your prior year return is a map that will lead you to treasures just waiting to be calculated on your current year return. When reviewing the information on last year’s return, compare the income you received in 2014 with the 2015 income tax documents you collected. The information gleaned may just save you from receiving a love letter from the IRS later in the year.
One of the most common correspondences taxpayers receive from the IRS is a CP2000 Notice from the Automated Under Reporter Unit (AUR). This notice informs the taxpayer that the information listed on their return does not match what was reported to the IRS. More often than not, taxpayers receive this notice because retirement income, wages, income from odd jobs or investment income was inadvertently omitted from the filed return.
About now you may be wondering what the prior year's return has to do with finding treasure when preparing your current return. Carryover credits, deductions and losses can make the difference between receiving a check from Uncle Sam or having to write one. A few of the most common carryover credits are certain Residential Energy Credits, the Adoption Credit, Foreign Tax Credit and Alternative Minimum Tax Credit. Depending on income levels, excess charitable contributions may be carried over for up to five years. Generally, there is a limit on the amount of capital losses a taxpayer may deduct in a given year on their income tax return. A common example of a capital loss would be selling stock for less than what you paid for it. In most cases the maximum capital loss a taxpayer may claim on their return is $3,000 per year. The remaining loss is carried forward to the next year. If your deductions were more than your income in 2014, you may have a Net Operating Loss (NOL) carryforward that you may use on your 2015 return.
And don’t forget to account for any estimated taxes you paid towards your 2015 return throughout the year. This includes any of your 2014 refund you applied to the 2015 tax year.
Happy hunting!