The weather is getting warmer, days longer and vacation costs are adding up which means summer is here! While it’s a great time to relax, taxpayers should also make sure they have their expenses under control and take a moment to get organized, in order to avoid tax problems. We’ve listed some common tax problems you could potentially face this summer and provided our tips on how to best handle the situation and avoid issues with the Internal Revenue Service (IRS).
- Obtain proper work status
Unless you are self-employed, you don’t want to be classified as an independent contractor. In this case, workers are responsible for paying income taxes (and Social Security/Medicare) since taxes are not withheld from the worker’s wages. Completing a W-4 upon employment at a new company will avoid the headache next April when it comes to tax preparation season.
- Make a donation
Summer is a great time to clean out unnecessary clutter. Instead of throwing out clothes, shoes or other gently used items, you should gift them to someone in need. Whether it is monetary or itemized, you can donate to a qualified charity or non-profit organization. With proof of donation, you’ll be able to deduct those charitable contributions from your taxes.
- Claim your childcare costs
The schedule for working parents might be the same in the summer, but your kids likely have a few months off – which requires child care and other unexpected costs. A great option is to sign them up for a day camp as it can benefit your taxes later on since the cost may count as an expense towards the Child and Dependent Care Credit.
- Deduct job-related moving expenses
If your job requires you to relocate or you are completely switching employers/office, then you can deduct the costs once you’ve completed distance and time tests. This is a great way to get a tax break without itemizing deductions.
- Update name and address
Do so with Social Security Administration to avoid delays. This one is mostly for the newlyweds who plan to get married this summer, but aren’t yet thinking about tax time. Tying the knot will also change your filing status and withholdings so be sure to have the most up-to-date information on file.
- Report seasonal damage
If property has been damaged due to storms, fires or other disasters, the reduction in value of your damaged property can be deducted on your tax return as a casualty loss.
- Update your records
Now that we are over halfway through the year, you’ll want to make sure your information is up to date and accurate. Compile all files and paperwork and organize the receipts you’ve been holding on to. All of this will help make the process easier in the coming months.
- Talk to a tax professional
Before you know it, it’ll be spring again and all you’ll be thinking about is taxes! Don’t let the stress prevent you from enjoying everything the summer has to offer. Call Tax Defense Partners to get help with any and all of your tax dilemmas.