Taxes

Everyone makes mistakes, but making a mistake on your income-tax return can cost you. It could delay your refund, boost your tax bill, require an amended return or even trigger an audit. Before you submit your return electronically or put it in the mail, double-check to make sure you haven’t made any errors.

Simple slip ups

Many tax-return mistakes are simple ones. Ensure that you’ve entered the correct name, address and Social Security number for every person listed on your return. Another frequent error is to enter the right information on the wrong line. So it pays to go through your return line by line.

Clear up confusion

It’s important that you use the right filing status. If you’re not sure which filing status is right for you, use the interactive tool “What is My Filing Status?” on www.irs.gov. You can also check the IRS website to figure out who you can claim as a dependent. Once you determine who qualifies as your dependent(s), verify that you have checked the appropriate exemption boxes for your personal, spousal and dependency exemptions.

Correctly calculate credits and deductions

If you’re claiming any credits, such as the dependent care credit, you need to follow the instructions carefully. And check that you have completed the necessary forms or schedules. If you’re taking the standard deduction, verify that you are claiming the correct one. You can use the chart in the Form 1040 Instructions or use the interactive tool “How Much is My Standard Deduction?” on www.irs.gov.

Check your math

It’s very easy and common to make simple math errors while preparing your tax return. It’s a good idea to double-check that you’ve added and subtracted all numbers correctly and that you haven’t transposed any numbers. Ensure that you used the right column on the tax table when figuring out your tax.

Final details matter

Don’t be in such a rush to finish your return that you forget a few final, simple steps. If you’re filing a paper return, verify that you (and your spouse if it’s a joint return) have signed and dated the return. Attach Copy B of each Form W-2 that you received from your employers. Attach each Form 1099-R that shows federal tax withholding. And attach all other necessary schedules and forms in sequence number order. Make a copy of the return and all attachments for your own records. Use the correct mailing address from your tax form instructions, and include a check or money order if you owe tax. And, finally, check that you put sufficient postage on your envelope.

Connect with our team today for all the latest and most current tax rules and regulations by calling 212-880-2617 or requesting a consultation online.

It’s hard not to like a tax refund. And many taxpayers receive them — over 116 million federal income-tax refunds were issued to individual taxpayers in 2014, according to IRS data.

If you expect to receive a refund this year, here is some food for thought.

Plan for Your Taxes

The reason you are receiving a refund is that you paid too much tax, either through wage withholding or by making payments of estimated tax. Instead of giving the IRS what amounts to an interest-free loan, you could have invested your money or used it for other things during the year.

It might make sense to have your employer withhold less tax from your wages or to reduce your quarterly estimated tax payments. But don’t pay too little. Then, you would have a large tax bill to pay when you file your taxes — and you could be subject to an underpayment penalty.

Make Hay This Year

Now let’s look at this year’s refund. What are you planning to do with it? Something impulsive, like take a vacation or make a purchase you wouldn’t otherwise make? If your finances are in good shape, then go for it. If not, you might want to consider the following possibilities.

Debt reduction. If you routinely carry credit card balances, use your refund to make a dent in your debt. With the average interest rate on credit cards around 18%, any reduction will help improve your financial situation.

Retirement savings. Unless you already have a healthy nest egg, investing your tax refund in a tax-advantaged retirement account is a step toward a more secure future.

College savings. Both Coverdell education savings accounts (ESAs) and Section 529 college savings plans provide tax benefits — two good ways to use your refund to save taxes and help with future expenses.

Emergency fund. If the money you have socked away for emergencies is running low, your tax refund could replenish it. If you don’t have an emergency fund, consider using your tax refund to start one. Aim for having enough liquid savings to cover between three and six months’ worth of expenses.

Connect with our team today by requesting a free consultation online for all the latest and most current tax rules and regulations or give us a call at 212-880-2617

The end of the year will be here sooner than you think. Before you get caught up in the holiday bustle, take a little time to consider year-end investment moves that may help reduce your 2016 income taxes.

Get help from your losers

If you’ve realized a capital gain from selling an investment, review your portfolio for investments that haven’t been performing up to your expectations. Selling underperforming investments can generate capital losses that can be used to offset capital gains and up to $3,000 of ordinary income.

Here’s how it works. Let’s say you have a $5,000 capital gain from selling shares in a mutual fund* earlier this year. You’d like to offset your gain by selling shares in another fund that has consistently shown losses on paper. Your strategy might be to sell enough of your shares in the second fund to realize an $8,000 loss. The loss would offset your $5,000 capital gain, and you’d be able to use the additional $3,000 to offset the same amount of ordinary income.

Look at your winners

If you’ve already sold investments at a loss, it may be a good time to take capital gains on other investments you’ve hesitated to sell because of the tax consequences.

Taxes should never be your only reason for selling an investment. Reviewing your portfolio with your financial professional and talking with your tax advisor can help you determine what makes sense for your situation. Give us a call today to learn how we can help at 212-880-2617. You can also request a free consultation online.

* Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won’t guarantee future results. An investment in mutual funds may result in the loss of principal.

Mutual funds involve risk and are offered by prospectus (and summary prospectus, if available), which you can get from your registered representative. Carefully consider investment objectives, risks, charges and expenses of the investment company before investing.

The prospectus will include this and other information; read it carefully before investing. Investing involves risks, and there is no guarantee that any one strategy — including diversification — ensures a profit or protects against a loss in a declining market. You should consult with your financial professional regarding your particular situation.