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April 15, 2020 will be here before we know it. Whether you file on your own or use a CPA to help file your taxes, let’s go through some strategies to make the next few months a little easier for you and your family.

Strategy 1: Use a tax checklist and organizer.

Start by making folders for any separate returns such as a joint return, kids filing separate, LLCs, Trusts, etc. To make it easier for yourself later, you can create folders ‘inside those folders’ such as Income, Expenses, Charitable Contributions, Misc./Medical/Not Sure.

In the front of the folder keep a checklist marking things off as they arrive (realizing some may not be available until March). Using some type of a tax checklist or organizer can help you avoid that paper chase and assemble all of the key documents you need in advance; completing your return is then a matter of filling in data. Tax checklists abound online.

Our CPA sends us a Checklist every year noting what we had last year, giving us a benchmark on what to look for assuming most everything was the same, call your CPA and ask for it if you have not received it yet; such forms often come prepopulated with your tax data from the previous year. Comparing the current tax year's numbers to those of the year prior can be a handy way to track trends in your income, interest earned on your investments, and charitable giving, among other items.

Strategy 2: Itemize or Standard Deduction?

For larger families with an average mortgage, you probably will be itemizing, but smaller households or households with no debt may take the standard deduction. Most CPAs and software will help you make the correct choice. But the software can only help you make the correct choice if you put in the correct information from the documents you have collected.

If you employ a tax advisor to help with your tax return, he or she may have provided some guidance on this issue based on your 2018 return. If you do your taxes on your own, you can probably get a pretty clear view of whether you'll itemize or use the standard deduction by taking stock of the major deductible items. For 2019, your itemized deductions would need to be greater than $12,200 for single taxpayers and $24,400 for married couples filing jointly for itemizing to be worthwhile. 

For most households, the biggest-ticket deductible items include state and local taxes (including property taxes), which are now capped at $10,000 per household; charitable deductions; home mortgage interest; and medical expenditures in excess of 10% of adjusted gross income. 

Strategy 3: Round up your investment documentation.
This is the season when tax documents arrive, some are non-descript, so open your mail! Also, if you use online accounts or both, you may have selected or inadvertently selected receiving some of your tax documents online ‘only’ so use your checklists and go print them off. Bear in mind, however, that the deadline for sending out 1099s is a bit later than other forms you might receive, like W-2s; it's mid-February and even later for some investment providers. If you want to get a jump on your taxes but still don't have all of the documents you need, you may be able to get the information you seek by hopping online with your investment providers; firms typically maintain "tax centers" where you can download and/or print out the relevant forms, including 1099s that haven't yet arrived or that you've mislaid. If you get K-1s from MLPs you may have to go directly to the investment website to get the information needed.

Strategy 4: Knock off your contributions as soon as possible.
Your deadline for contributing to an IRA or health savings account is the same as your tax-filing deadline. But that doesn't mean you need to wait until you get your taxes in to tackle those tasks. In fact, if you want to deduct your health savings account or IRA contribution on your tax return, you'll need to make that contribution before you file your return.

Even if you're not deducting your contribution (you're making a Roth IRA contribution, for example), there's an opportunity cost to waiting until the last minute to make these contributions. And those opportunity costs can add up if you're a serial procrastinator. Assuming you invest in something that goes up more often than it goes down, you'll lower your return by waiting until your tax-filing deadline each year.

Of course, from a practical standpoint, some investors wait to make those contributions because they want to see what their tax bills are first. If that describes your situation, consider signing on for an automatic-investment program for your future IRA contributions so you're not at the mercy of your tax bill each year. For the 2020 tax year, investors under age 50 can hit their full $6,000 maximum IRA contribution by putting in an even $500 a month; those over 50 can max out with a $583.22 monthly contribution.

This is also a great time to review retirement contribution strategies for the upcoming year and the new contribution limits for 2020. If you want to talk more about any of these ideas give us a ring, or if you need a good CPA referral we would be glad to give you some names of people we trust, that you can interview for yourself!

Travis Anderson
About the Author
Travis is like a bear hug on your brain. Markets and estate issues define the pallet, while hints of sarcasm and notes of abstruse words finish off this nicely plucked author who prefers barley.