COLUMBUS — The Internal Revenue Service reminds taxpayers that November can be a good time for a tax status review.
Taking some time during the lull before the year-end rush can reduce stress and promote filing accuracy when tax season begins in January.
“If you haven’t yet organized your receipts and other documents for donations and other tax write-offs you’ve made during 2015, there’s no time like the present to tackle that chore,” said Jennifer Jenkins, IRS spokesperson for Ohio. “Not only does the IRS require documentation for tax deductions and credits claimed, but having the info organized and available reduces the chance you’ll forget to claim something that could save you money on your taxes.” The IRS website, IRS.gov, offers information about tax rules for donations and other deductions and credits.
In most cases, the IRS does not require taxpayers to keep records in any special manner. In general, taxpayers should keep all documents that may have an impact their federal tax return. Such items may include bills, receipts, invoices, mileage logs, canceled checks or other proofs of payment, and any other records to support deductions or credits claimed on a tax return.
Taxpayers whose employers deduct taxes from their pay can use the “Withholding Calculator” on IRS.gov to check if the right amount of tax is being withheld. Life events like marriage, divorce, and birth or adoption of a child may impact tax exemptions and/or filing status. “If too much tax is withheld, Uncle Sam’s got your money until you get your refund. If not enough is withheld, you’ll owe tax at the end of the year and you may, in some cases, owe a penalty,” Jenkins said.
A near year-end tax review can also help taxpayers determine where they stand with their retirement savings accounts. “If you’re still working, review the 2015 Individual Retirement Account (IRA) contribution and deduction limits to make sure you’re not missing out on your retirement savings opportunities. If you exceed the 2015 IRA contribution limit, you’ll need to withdraw excess contributions or pay a 6% tax each year on the excess amounts left in your account,” Jenkins said. Low- and moderate-income workers who set aside money for retirement may qualify for the Saver’s Credit; details are available at IRS.gov.
Taxpayers age 70 1/2 or older must take a 2015 required minimum distribution by Dec. 31, 2015. (For those who turned 70 1/2 in 2015, the deadline is April 1, 2016.) IRA required minimum distributions can be calculated using worksheets on IRS.gov. A 50% excise tax can be accessed on any required minimum distribution not taken on time.
Eligible employees should consider their health flexible spending arrangement (FSA) options for 2016. “FSAs offer a way to use tax-free dollars to pay medical expenses not covered by other health plans. Participation is normally decided weeks before the new plan year starts. Employees who contributed to FSA plans in 2015 must choose to participate again in 2016,” Jenkins said. Self-employed individuals are not eligible.
The IRS suggests that taxpayers take steps to choose a tax return preparer. “Most taxpayers get help from a tax preparer or use tax software to do their taxes,” said Jenkins. “Come filing season, many tax pros will be knee-deep in tax returns for clients. By shopping around now, you’ll have time to find and talk with tax preparers and consider your options. Your tax pro may recommend some savvy, last-minute, money-saving tax moves.” The IRS encourages taxpayers to choose their return preparer wisely, because taxpayers are legally responsible for the data on their returns. Taxpayers can search IRS.gov for “Choosing a Tax Professional” for more information and selection tips.