Personal tax tips for tax preparation & income tax planning

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This page last updated on March 20, 2003

Personal Tax Preparation & Income Tax Planning Tips from Brookwood Tax Service
(Winter, 2003)

Getting Ready for Your Tax Preparer

How to gather and organize your information and documents.

The better organized you are when you sit down with the tax data organizer from your tax professional, the more accurate your tax return will be and the less costly tax preparation will be in terms of time and fees.

The best time to start gathering and sorting your tax documents and records is now, so you are ready when that tax organizer arrives in the mail. See the Full Article for details.

Tax Rules on Refinancing a Home Mortgage

What expenses can be deducted and what qualifies as points?

Mortgage rates were on the decline again in 2002 and this provides opportunities for homeowners to lower their interest rates.

It is important to know when the interest you will be paying qualifies as deductible mortgage interest during tax preparation and when it will not. Any points paid on the new mortgage may be deductible all at once or may have to be deducted over the life of the loan, affecting your income tax planning. Full Article

Are Some of the Proceeds on the Sale of Your Residence Taxable?

If you used your home for business you may have taxable gain.

For most taxpayers, gain of up to $250,000 ($500,000 if a joint return is filed) is free from tax.

However, if you use any part of your home for business purposes, some of your gain may be taxable. If you claimed any depreciation on your home after May 6, 1997, as a result of business use, that portion of the gain will be taxable and must be accounted for on your tax return. Full Article

Part-Year Georgia Income Tax Options

Be Sure You Select the One Resulting in the Lowest Tax!

If you lived part of the year in Georgia, you have up to three possible options for calculating personal exemptions and standard or itemized deductions used in calculating your income subject to Georgia income tax. Full Article

Education Tax Breaks -- Tax-advantaged savings programs, education credits and education deductions.

The tax code provides a number of ways for families to postpone or eliminate taxes on college savings. There also are education tax credits available that can slash your federal income tax dollar-for-dollar.

In addition, there is a new education expense deduction available for 2002 and later tax years that will save both federal and state taxes during tax preparation. Full Article

Clothing Required for Your Job - Is It Deductible?

If you are required to wear a uniform that is not suitable for street wear, it may be a deductible business expense. Full Article

New Rules Permit Change in IRA Distribution Amount

Did your IRA lose value?

Did you began taking periodic distributions from your IRA before you turned 59 and a half based on the balance in your IRA and that balance has declined significantly along with the stock market? You may be able to reduce the amount of future annual distributions without penalty.
Full Article

The Rules for Excluding Clergy Housing Allowance are Clarified

Your Exclusion may be Limited

The IRS has rewritten unclear rules pointed up in some court cases that resulted in some clergy excluding more of their income than Congress intended. Clergy housing exclusions now may be smaller than some had taken in the past. Full Article

If You have Adopted a Child

Your Expenses may Qualify for a Tax Credit

The law has been changed to increase the tax credit for qualified adoption expenses to $10,000.. This is a dollar-for-dollar reduction of the federal income tax you owe. Full Article

If You are a Foster Care Provider
More of your placement agency payments may be nontaxable

The law has been changed to exclude from income not only payments from government agencies or non-profits, but from any placement agency licensed or certified by a state government. Full Article

Calculate Flexible Spending Account Amounts for Next Year

If your employer maintains a flexible spending account where you are allowed to defer part of your salary tax-free for medical or child care expenses, spend some time in December to accurately determine what you need to defer for the following year. Any unused amounts are not refunded to you, so an accurate estimate is critical in your income tax planning. Most employer plans allow a once a year change to the amount you can defer on January 1.


	Add a Roth IRA to Your 401(k) You can actively participate in your employer's qualified retirement plan and still contribute to a Roth IRA. A deduction for contributions to a traditional IRA may be limited or nondeductible if you are a participant in a qualified retirement plan.


	Mutual Fund Basis If you sold a mutual fund, don't forget to add all the reinvested dividends and capital gain distributions that have already been taxed to your original cost basis. This will decrease your taxable gain or increase your deductible loss during the tax preparation process.


	Check That W-2! Your employer is required to issue your W-2 by January 31. When you receive it, double-check it for accuracy. Often, Social Security numbers or other amounts are entered incorrectly. If this happens, ask your employer for a correct version before visiting your tax preparer. It's a good idea to double-check the accuracy of any Form 1099s that you receive from financial institutions as well. If errors are not discovered until the tax preparation process, they will delay your refund.


	Faster Tax Refund If you want to receive your tax refund faster, have it deposited directly into your savings or checking account. Doing so will also ensure that your check won't get lost in the mail.


	Zero-Coupon Bond Income If you purchased a zero-coupon bond and the bond is not held in a tax-deferred account such as an IRA, you must include the accrued interest in your income each year. This is true even if the interest is not actually paid to you until the bond reaches maturity.


	Georgia Part-Year Taxpayers There are three ways to calculate your Georgia deductions and two ways to calculate state personal exemptions. Make sure your tax preparer knows the options and uses the best one for your tax return!

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Personal Tax Preparation & Income Tax Planning Tips from Brookwood Tax Service (Winter, 2003)

Personal Tax Preparation & Income Tax Planning Tips from Brookwood Tax Service
(Winter, 2003)