Most of you should have no problem preparing your own taxes. If you have a very simple tax return, you may qualify for the IRS Free File program giving access to H&R Block and other resources to e-file your federal return at no charge. If you prefer a personal touch, the IRS VITA program offers tax help to those earning less than $52,000. If you don’t qualify for either program, both H&R Block and TurboTax are available at a low price online or in your local store.
Whenever we start working with financial planning clients, we review their past tax returns. While many of them are ably self-prepared, we have found that with some categories of people it makes sense to use a tax professional.
Same Sex Married Couples. Despite a pending court challenge against Colorado’s ban on same-sex marriage, there are perhaps thousands of married same-sex couples in our state. They were married in one of the seventeen states or many countries that permit same-sex marriage. With the Supreme Court’s Windsor decision last year, the federal government now recognizes same sex marriage. Now those in a same sex marriage must file married filing jointly or separately and cannot file as single or head of household.
While it may just be a matter of changing your tax filing status, there may be complexities that could save you thousands depending on your personal situation. The IRS now permits same sex marrieds to amend previous returns back to tax year 2010. But you may need to file three sets of amended tax returns using Form 1040X to get a refund. Those who are in same sex marriages in which one person earns significantly more than the other are likely to benefit. Another consideration is if employer health insurance benefits were provided to a same sex spouse. These were considered taxable income previous to last year. Now same sex spouses can receive tax free employer health insurance benefits and are entitled to amend previous tax returns to reflect this difference.
Significant Flood Damage. If you suffered from our historic floods last September, you may have the right to deduct unreimbursed casualty losses. Consider the damage to your home and your property. Perhaps your property was unaffected but its value was due to damage in the general area. Because we were declared a federal disaster area, you have the right to recognize the casualty loss through an amended 2012 return or for 2013. If you suffered an unreimbursed loss in value that exceeds 10 percent of your income to all of your property, you should get help with a tax pro who could defend your tax return if necessary. Same goes if you suffered any significant loss at all to your rental or commercial property.
Business and rental property owners. Those who own businesses or rental properties should get help with their taxes. The IRS and Colorado in effect will help pay for your tax preparation as the amount attributable to the business and rental can be deducted on the appropriate schedules. With businesses you have complexities such as the opportunity to deduct capital expenses over a number of years or in a single year. You may be able to put in place a small business retirement plan that allows you to deduct up to $56,500 a year depending on your income and age. A qualified tax preparer can earn their fee in a millisecond with good advice here. Rental property owners face different depreciation schedules and options, plus some difficult questions about what to do upon the sale of their property. Should they engage in a tax-free exchange or pay the tax?
If one of these cases applies to you, you fall under the dreaded Alternative Minimum Tax, or have incentive stock options, a qualified tax preparer will be a worthwhile investment for even the thriftiest taxpayer.