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Preparing for Tax Day bacground

Preparing for Tax Day

Use these tips to help you prepare for your appointment

What should you do to prepare for your appointment?

Required documents to keep on file:

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  • Copies of Driver's License or State IDs

  • Social Security Cards

  • Proof of Residence for dependents claiming EIC

Income documents:

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  • Income from jobs: forms W-2 for you and your spouse

  • Investment income—various forms 1099 (-INT, -DIV, -B, etc.), K-1s, stock option information

  • Income from state and local income tax refunds and/or unemployment: forms 1099-G

  • Taxable alimony received

  • Business or farming income—profit/loss statement, capital equipment information

  • If you use your home for business—home size, office size, home expenses, office expenses

  • IRA/pension distributions—forms 1099-R, 8606

  • Rental property income/expense—profit/Loss statement, rental property suspended loss information

  • Social Security benefits—forms SSA-1099

  • Income from sales of property—original cost and cost of improvements, escrow closing statement, cancelled debt information (form 1099-C)

  • Prior year installment sale information—forms 6252, principal and Interest collected during the year, SSN and address of payer

  • Other miscellaneous income—jury duty, gambling winnings, Medical Savings Account (MSA), scholarships, etc.

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(Use our handy IRS document search tool for your documents)

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How can I check on my tax refunds? 

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Tax Related Web-sites/phone numbers: IRS www.irs.gov IRS Get Refund Status IRS Inquiry Phone: (800) 829-1040

Other tax documents:

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  • IRA contributions

  • Energy credits

  • Student loan interest

  • Medical Savings Account (MSA) contributions

  • Moving expenses (for tax years prior to 2018 only)

  • Self-employed health insurance payments

  • Keogh, SEP, SIMPLE and other self-employed pension plans

  • Alimony paid that is tax dedcutible

  • Educator expenses

  • State and local income taxes paid

  • Real estate taxes paid

  • Personal property taxes—vehicle license fee based on value

  • Estimated tax payment made during the year, prior year refund applied to current year, and any amount paid with an extension to file.

  • Direct deposit information—routing and account numbers

  • Foreign bank account information—location, name of bank, account number, peak value of account during the year

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Tax deduction documents:

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  • Advance Child Tax Credit payment

  • Child care costs—provider’s name, address, tax id, and amount paid

  • Education costs—forms 1098-T, education expenses

  • Adoption costs—SSN of child, legal, medical, and transportation costs

  • Home mortgage interest and points you paid—Forms 1098

  • Investment interest expense

  • Charitable donations—cash amounts and value of donated property, miles driven, and out-of-pocket expenses

  • Casualty and theft losses—amount of damage, insurance reimbursements

  • Other miscellaneous tax deductions—union dues, unreimbursed employee expenses (uniforms, supplies, seminars, continuing education, publications, travel, etc.)  (for tax years prior to 2018 only)

  • Medical and dental expenses

CURRENT TAX RATES image

CURRENT TAX RATES

Current rates information provided by Tax Foundation

TAX RATES

2023 Tax Brackets

Income Tax Brackets and Rates​​

For 2023, income limits for all tax brackets as well as all filers will be adjusted for inflation and will be as follows.... The top marginal income tax rate of 37 percent will hit taxpayers with taxable income of $578,100 and higher for single filers and $698,750 and higher for married couples filing jointly..(SEE Table 1)
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As you review the brackets, the income ranges for each rate have been adjusted for inflation.

2022 Tax Brackets

Income Tax Brackets and Rates​​

The Tax Cuts and Jobs Act’s tax-bracket changes went into effect for the 2018 tax year. There are no structural changes for 2022. Seven tax brackets exist, and then seven marginal tax rates — From 10% to 37%. These are also unchanged.
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As you review the brackets, the income ranges for each rate have been adjusted for inflation.

2023 Tax Brackets screenshot
2023 Tax Brackets screenshot
2023 Tax Brackets screenshot

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Standard deductions for single filers has increased by $200; $400 for married couples filing jointly (SEE Table 2). The personal exemption for 2020 remains eliminated.

Standard Deduction and Personal Exemption

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The standard deduction for single filers will increase by $200 and by $400 for married couples filing jointly (Table 4).

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Table 2. 2019 Standard Deduction and Personal Exemption.

Standard Deduction and Personal Exemption

Standard Deduction and Personal Exemption image statistic

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The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two. More information can be found at IRS.Gov (SEE Table 3).

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Table 3. 2019 Alternative Minimum Tax Exemptions (Source:IRS)

The Alternative Minimum Tax image

In 2020, the 28 percent AMT rate applies to excess AMTI of $197,900 for all taxpayers ($98,950 for married couples filing separate returns).

AMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. In 2020, the exemption will start phasing out at $518,400 in AMTI for single filers and $1,036,800 for married taxpayers filing jointly (SEE Table 4).

The Alternative Minimum Tax image

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The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two. The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, this exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent. The AMT exemption amount for 2019 is $71,700 for singles and $111,700 for married couples filing jointly (Table 3).

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Table 3. 2019 Alternative Minimum Tax Exemptions

The Alternative Minimum Tax image

In 2019, the 28 percent AMT rate applies to excess AMTI of $194,800 for all taxpayers ($97,400 for married couples filing joint returns).

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AMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. In 2019, the exemption will start phasing out at $510,300 in AMTI for single filers and $1,020,600 for married taxpayers filing jointly (Table 4).

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Table 4. 2019 Alternative Minimum Tax Exemption Phaseout Thresholds

Alternative Minimum Tax

Alternative Minimum Tax

The Alternative Minimum Tax image

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Maximum Earned Income Tax Credit in 2020 for single and joint filers is $538, if the filer has no children (SEE Table 5). The maximum credit is $3,584 for one child, $5,828 for two children, and $6,660 for three or more children. These are small increases compared to 2019.

Earned Income Tax Credit 

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Maximum Earned Income Tax Credit in 2020 for single and joint filers is $538, if the filer has no children (SEE Table 5). The maximum credit is $3,584 for one child, $5,828 for two children, and $6,660 for three or more children. These are small increases compared to 2019.

Earned Income Tax Credit 

Earned Income Tax Credit  image
Earned Income Tax Credit  image

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The Tax Cuts and Jobs Act includes a 20 percent deduction for pass-through businesses against up to $163,300 of qualified business income for single taxpayers and $326,600 for married taxpayers filing jointly (SEE Table 6).

Qualified Business Income Deduction

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The Tax Cuts and Jobs Act includes a 20 percent deduction for pass-through businesses against up to $160,700 of qualified business income for unmarried taxpayers and $321,400 for married taxpayers (Table 7).

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Table 7. 2019 Qualified Business Income Deduction Thresholds

Qualified Business Income Deduction

Qualified Business Income Deduction image
Qualified Business Income Deduction image
TAX RECORDS RETENTION bacground image

TAX RECORDS RETENTION

Tax record retention times

TAX RECORDS RETENTION

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Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the “three-year law” and leads many people to believe they're safe provided they retain their documents for this period of time. Even if the original records are provided only on paper, they can be scanned and converted to a digital format. Once the documents are in electronic form, taxpayers can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD (don't forget to label it). 

 

Create a Backup Set of Records and Store Them Electronically. Keeping a backup set of records — including, for example, bank statements, tax returns, insurance policies, etc. — is easier than ever now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. You might also consider online backup, which is the only way to ensure that data is fully protected. With online backup, files are stored in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe.

WHEN IN DOUBT, DON'T THROW IT OUT

Caution: Identity theft is a serious threat in today's world, and it is important to take every precaution to avoid it. After it is no longer necessary to retain your tax records, financial statements, or any other documents with your personal information, you should dispose of these records by shredding them and not disposing of them by merely throwing them away in the trash.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.

Business Documents To Keep For One Year

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  • Correspondence with Customers and Vendors

  • Duplicate Deposit Slips

  • Purchase Orders (other than Purchasing Department copy)

  • Receiving Sheets

  • Requisitions

  • Stenographer's Notebooks

  • Stockroom Withdrawal Forms

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Business Documents To Keep For Three Years

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  • Employee Personnel Records (after termination)

  • Employment Applications

  • Expired Insurance Policies

  • General Correspondence

  • Internal Audit Reports

  • Internal Reports

  • Petty Cash Vouchers

  • Physical Inventory Tags

  • Savings Bond Registration Records of Employees

  • Time Cards For Hourly Employees

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Business Documents To Keep For Six Years

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  • Accident Reports, Claims

  • Accounts Payable Ledgers and Schedules

  • Accounts Receivable Ledgers and Schedules

  • Bank Statements and Reconciliations

  • Cancelled Checks

  • Cancelled Stock and Bond Certificates

  • Employment Tax Records

  • Expense Analysis and Expense Distribution Schedules

  • Expired Contracts, Leases

  • Expired Option Records

  • Inventories of Products, Materials, Supplies

  • Invoices to Customers

  • Notes Receivable Ledgers, Schedules

  • Payroll Records and Summaries, including payment to pensioners

  • Plant Cost Ledgers

  • Purchasing Department Copies of Purchase Orders

  • Sales Records

  • Subsidiary Ledgers

  • Time Books

  • Travel and Entertainment Records

  • Vouchers for Payments to Vendors, Employees, etc.

  • Voucher Register, Schedules

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Special Circumstances

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  • Car Records (keep until the car is sold)

  • Credit Card Receipts (keep with your credit card statement)

  • Insurance Policies (keep for the life of the policy)

  • Mortgages / Deeds / Leases (keep 6 years beyond the agreement)

  • Pay Stubs (keep until reconciled with your W-2)

  • Property Records / improvement receipts (keep until property sold)

  • Sales Receipts (keep for life of the warranty)

  • Stock and Bond Records (keep for 6 years beyond selling)

  • Warranties and Instructions (keep for the life of the product)

  • Other Bills (keep until payment is verified on the next bill)

  • Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

Personal Documents To Keep For One Year

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  • Bank Statements

  • Paycheck Stubs (reconcile with W-2)

  • Canceled checks

  • Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)

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Personal Documents To Keep For Three Years

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  • Credit Card Statements

  • Medical Bills (in case of insurance disputes) 

  • Utility Records

  • Expired Insurance Policies 

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Personal Documents To Keep For Six Years

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  • Supporting Documents For Tax Returns

  • Accident Reports and Claims

  • Medical Bills (if tax-related)

  • Property Records / Improvement Receipts

  • Sales Receipts

  • Wage Garnishments

  • Other Tax-Related Bills

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Personal Records To Keep Forever

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  • CPA Audit Reports

  • Legal Records

  • Important Correspondence

  • Income Tax Returns

  • Income Tax Payment Checks

  • Investment Trade Confirmations

  • Retirement and Pension Records

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Business Records To Keep Forever 

 

While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you'll want to retain these documents indefinitely.

  • Audit Reports from CPAs/Accountants

  • Cancelled Checks for Important Payments (especially tax payments)

  • Cash Books, Charts of Accounts

  • Contracts, Leases Currently in Effect

  • Corporate Documents (incorporation, charter, by-laws, etc.)

  • Documents substantiating fixed asset additions

  • Deeds

  • Depreciation Schedules

  • Financial Statements (Year End)

  • General and Private Ledgers, Year End Trial Balances

  • Insurance Records, Current Accident Reports, Claims, Policies

  • Investment Trade Confirmations

  • IRS Revenue Agents' Reports

  • Journals

  • Legal Records, Correspondence and Other Important Matters

  • Minute Books of Directors and Stockholders

  • Mortgages, Bills of Sale

  • Property Appraisals by Outside Appraisers

  • Property Records

  • Retirement and Pension Records

  • Tax Returns and Worksheets

  • Trademark and Patent Registrations

​Reviewing Your Financials

REVIEWING YOUR FINANCIALS

Reviewing Financials

Reviewing Financials

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