LIVINGSTON, NJ — Michael Karu, CPA/CFF, Member, Levine, Jacobs and Company, LLC, in Livingston recently spoke with TAPinto Livingston, West Essex and West Orange about getting ready for tax season.
Karu provided the following tips for how to prepare:
“As February arrives—bringing with it freezing temperatures, snow and ice—it also reminds everyone that it’s time to start focusing on getting ready to do your taxes. While the various tax forms are coming in, there can be confusion in determining what is necessary. We advise our clients to get a large envelope and, every time that something official arrives in the mail, put it into the envelope.
“Of course, this method doesn’t guarantee that everything that will be needed will be there, but it’s a start. It is important that each envelope is opened and the contents reviewed. Even if you know very little about taxes, it will provide some basic familiarity.
“For those with slightly more interest in what goes into their taxes, we recommend getting an accordion file. Then, as information comes in, it can be sorted by type. For my own taxes, I separate the paperwork putting W-2s into the first section, dividends and interest income into the second, K-1s from partnerships or S Corporations into the third, and other income-related items into the fourth."
“Deductions are broken into three sections: medical, taxes and interest, and charitable contributions. By sorting through the paperwork in advance, it will speed up the process and potentially save money on tax preparation."
“In addition to the expected W-2s and 1099s, many people will be receiving Form 1095-A, B, or C. These forms will indicate proper health care coverage."
“The philanthropic should have been receiving letters of thanks for their generosity. Those letters document the donations. While they are not imminently important, in case of an audit, those letters will be necessary and should be kept with other tax information.
“In the case of donated non-cash items, such as clothing, a receipt confirming those donations should be kept. Detailed records of donated items—for instance, eight men’s shirts or four women’s sweaters should be included and kept with the receipts. Many organizations will provide an estimated value range that can be used to calculate the deduction."
“Keep in mind that, if more information, rather than less, is sent to your tax preparer, your return will be more accurate. As a friend once observed to me, ‘Accuracy is the key to success.’”
About Michael Karu:
Michael H. Karu, CPA/CFF/CGMA, is a member of Levine, Jacobs & Company, LLC, a Livingston-based accounting and consulting firm. He is qualified by the Superior Court of New Jersey, Family Part, as an expert witness and as an authority on business valuations, specifically for closely held or family-owned businesses. Additionally, he is a Certified Divorce Mediator and is also certified in Financial Forensics.