Uncategorized

2024 Tax Preparation Checklist: Documents To Gather Before Filing

Before you dive into preparing your income tax return, check out our updated 2024 Tax Preparation Checklist. It’s a simple guide to help you streamline the process. Not every section will apply to you, so feel free to skip what doesn’t. By organizing your tax documents ahead of time, you’ll save yourself time (and stress) when it’s time to file.

Before You Start Tax Preparation:

1️⃣ Download and print the checklist.
2️⃣File it—either place it inside a folder or attach it to the outside.
3️⃣ Organize your tax documents as they come in. Check them off the list as you go.
4️⃣Scratch off irrelevant items from the checklist—it’s laid out by the most common tax documents first.
5️⃣ Add missing information, like bank routing/account numbers for direct deposit.
Use Quicken® or another financial tracker? Print out your annual report—it’s a game-changer for simplifying your tax prep.

Having a financial summary in hand beats digging through your bank statements for hours. Highlight key details in the report that you’ll need or jot down notes for reminders.

Personal Information:

The IRS needs to know exactly who’s filing and who is covered in your tax return. To do this, you will need Social Security numbers and dates of birth for you, your spouse, and your dependents.

Information About Your Income:

💡 Income from jobs: Forms W-2 for you and your spouse
💡 Investment income: Forms 1099 (-INT, -DIV, -B), K-1s, stock option details
💡 Refunds/unemployment income: Forms 1099-G
💡 Business/farming income: Profit/loss statement, capital equipment info
💡 Rental property income: Profit/loss statements, expense details, rental property tax info

Adjustments to Your Income:

Certain deductions can lower your taxable income, possibly leading to a higher refund (or a smaller bill). Keep documentation for:

📌 IRA contributions
📌 Student loan interest
📌 Health Savings Account contributions (HSA)

Itemized Deductions & Credits:

Make sure you get every deduction and credit you’re eligible for. Here’s what you’ll need:

✅ Child care costs: Provider’s tax ID, address, and amount paid
✅ Education costs: Form 1098-T and receipts for expenses
✅ Charitable donations: Cash contributions, value of property donated, and mileage driven
✅ Medical and dental expenses: These can often be overlooked, so make sure you track them.

Taxes You’ve Paid:

Make sure you don’t pay more than necessary by documenting:

📌 State and local income taxes paid
📌 Real estate taxes paid
📌 Personal property taxes (like vehicle license fees)

Other Important Info:

💡 Estimated tax payments made throughout the year
💡 Direct deposit info (routing/account numbers)
💡 Foreign bank account info if applicable

Getting organized with your tax preparation checklist isn’t just about avoiding last-minute panic—it’s about saving time and making the process as painless as possible. Plus, it increases the chances of maximizing your return.

Need a hand with this year’s taxes?

Let’s chat! We can guide you through every step and make sure nothing falls through the cracks. Let’s make 2025 the year of stress-free filing.

What triggers an audit by the IRS?

With tax season behind us, many are finding unexpected IRS notices in their mailboxes. While seeing the IRS letterhead can cause a spike in anxiety, the good news is that most of these notices are routine. In fact, many are computer-generated, alerting you to unpaid taxes or simple mistakes on your return that can be easily fixed. Just because you’ve received an IRS notice doesn’t necessarily mean you’re facing an audit.

In reality, fewer than 1 percent of individual tax returns are selected for an audit. That’s about a 1-in-160 chance. However, according to the Taxpayer Advocate Service, 6.2 percent of tax returns—or a 1-in-16 chance—are flagged for closer examination. Some of these “audit flags” don’t result in a full audit but may still require extra documentation to clear up.

Given the millions of tax returns filed each year, the chance of facing an IRS tax audit is slim. However, if you’re curious about why your return may have been selected or what raises the likelihood of being audited, here’s a breakdown of the common risk factors involved in the IRS audit process.

❗ These Risk Factors Increase Audit Chances:

1️⃣ You were randomly selected.
The IRS always audits an incredibly tiny sample of tax returns, but the likelihood is still extremely low. But if you are low or middle-income with a relatively simple tax filing situation and wondering why you’ve been audited, you were part of that tiny random selection.

2️⃣ Common audit flags on your return.
Even if you have legitimate deductions, credits, and income substantiation, there are certain lines on your tax return that are rife with errors and fraud across the board. These include the:

Specific tax benefits prone to error and fraud like the Earned Income Tax Credit have their own separate due diligence process. But the above three items are the most common triggers for an audit, even just partial audits, given the vast propensity people have in underestimating these items and not have them properly documented. People tend to overestimate the value of non-cash charitable contributions and frequently lack the substantiation for these deductions. Adoption is an incredibly long and expensive process, and even though it is a legitimate tax benefit in which the adoptive parents will have substantiation, it also equates to a tax credit that can spread out over numerous years and result in paying little or no tax. Because of this, the IRS flags these tax returns frequently.

The home office deduction is another area where people tend to overestimate both eligible expenses and the percentage or square footage of the home being used for the deduction. This deduction can also generate a business loss, resulting in paying little or no taxes. Because of this, the IRS is likely to flag tax returns that have suspiciously large home office deductions.

3️⃣ Someone reported you to the IRS.
The IRS has a whistleblower programthat awards up to 30 percent of the taxes collected and resultant penalties. If your ex-spouse suspects that you fudged your Goodwill donations or that co-worker who doesn’t like you overheard you say, “They never check!” with respect to that side hustle you didn’t report, it’s possible they could’ve anonymously tipped you off to get a quick payday.

4️⃣ You’re a small business owner or freelancer connected to someone being audited.
Even if your client, supplier, or other business associate was not committing tax fraud or malfeasance but simply got audited, people and companies that they paid or received money from are likely to be next. If they didn’t correctly report payments made, the IRS will want to see how the payers’ or recipients’ tax returns also match up.

Add Your Heading Text Here

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Need Help?

If you’ve received an IRS audit notice or are worried about one, don’t stress. Our tax experts can guide you through the process and resolve it as quickly as possible. Call us today for personalized assistance in handling your IRS tax audit.

Tax Benefits for Members of the Military in 2024

Military members benefit from a variety of special tax benefits. These include certain non-taxable allowances, non-taxable combat pay, and a variety of other special tax provisions designed to support those who serve.

Prominent Military Tax Benefits

💡 Service Member Residence or Domicile
A frequent question by service members is, “What is my state of residence for tax purposes?” since one’s duty station may change multiple times while serving. Luckily, the government passed a law to solve this issue. A service member continues to retain his or her home state of residence for tax purposes, even when required to move to another state under military orders. This also applies to other tax jurisdictions within a state, such as city, county, and personal property taxes. Thus, a service member will continue to file tax returns for his or her home state and not the state where he or she is stationed.

💡 Service Member Spouse’s Residence or Domicile
To simplify the tax-filing requirements of military couples, the Military Spouses Residency Relief Act of 2009 allows military spouses to claim the same state of domicile as their service member for tax purposes, provided they had also established domicile there.

For example, if Chris resides in California with his spouse, who is in the military, and Chris has earned income in California but had established domicile with his military spouse in Virginia, Chris would be subject to Virginia income tax laws instead of California’s. The couple would only need to file one state return – in this case, Virginia. There would be no obligation to file a California return.

Unfortunately, spouses who hadn’t established domicile in the same state as their service member spouse and who had earned income in the state where their spouse was stationed were still forced to file with both states (assuming both states have income tax).

💡 New for Years Beginning in 2018
Thanks to the Veterans Benefits and Transaction Act of 2018, an individual married to a military member now has more choices. Under the act, a spouse can elect to have the same state of domicile as their service member spouse, even if they didn’t previously have the same domicile. If the non-military spouse doesn’t make that election, they can continue to choose to file in their own domicile state.

Making these choices can significantly impact the amount of state tax the spouse might have to pay. For instance, a spouse of a service member stationed in a high-income-tax state can elect to use the state of residency of the service member, especially if that state has no or low income tax, and avoid the taxes where the spouse is stationed.

⚠️ Be Cautious
It can be tempting for a service member or their military spouse to declare their state of domicile as a state without any state income tax, like Texas, Nevada, or Florida. However, doing so without any real connections to the state can cause complications down the line.

💵 Non-Taxable Allowances
While all pays are taxable, most allowances are tax-exempt. The primary allowances for most individuals are BAS (Basic Allowance for Subsistence) and BAH (Basic Allowance for Housing), which are tax-exempt. Conus COLA is one allowance that is taxable. A law change mandated that every allowance created after 1986 would be taxable. Conus COLA, authorized in 1995, became the first taxable allowance. Tax savings can be significant as BAS and BAH average over 30% of a member’s total regular cash payments. In addition to being tax-exempt from federal and state taxes, these allowances are also excluded from Social Security taxes.

Need Help?

Want to ensure you’re making the most of your military tax exemptions and other tax benefits? Let’s take the confusion out of your tax situation—reach out to us today for personalized guidance!

Tax Breaks for Parents in 2024: What You Need to Know

Summer just ended and if you’re a working parent, there’s a valuable tax break you should keep in mind for the next summer season.

Many working parents need to arrange childcare for their kids under 13 (or any age if disabled) during the school break. One popular option that comes with a tax perk? Day camps! The cost of day camps can be counted as an expense for the Child and Dependent Care Credit. However, keep in mind that overnight camps and summer school or tutoring programs don’t qualify.

💵 Expense Qualifications

For an expense to qualify for the credit, it must be an “employment-related” expense; i.e., it must enable you and your spouse, if married, to work, and it must be for the care of your child, stepchild, foster child, brother, sister or stepsibling (or a descendant of any of these) who is under 13, lives in your home for more than half the year and does not provide more than half of his or her own support for the year. Married couples must file jointly, and both spouses must work (or one spouse must be a full-time student or disabled) to claim the credit.

The qualifying expenses are limited to the income you or your spouse, if married, earn from work, using the figure for whoever earns less. However, under certain conditions, when one spouse has no actual earned income and that spouse is a full-time student or disabled, that spouse is considered to have a monthly income of $250 (if the couple has one qualifying child) or $500 (two or more qualifying children). This means the income limitation is essentially removed for a spouse who is a student or disabled.

For 2021 only, the total expenses that you may use to calculate the credit may not be more than $8,000 (for one qualifying individual) or $16,000 (for two or more qualifying individuals). This limit does not need to be divided equally.

The credit reduces a taxpayer’s tax bill dollar for dollar. However, the credit can only offset income tax and alternative minimum tax liability, and any excess is not refundable. The credit cannot be used to reduce self-employment tax or the taxes imposed by the Affordable Care Act.

If the qualifying child turned 13 during the year, the care expenses paid for the child for the part of the year he or she was under age 13 will qualify.

Need Help?

Tax season shouldn’t add more stress to your busy schedule as a parent. Let’s simplify it! Contact us today, and we’ll help you take full advantage of the tax breaks that benefit working parents like you in 2024.

File a Tax Extension in 2024: What You Really Need to Know

Sometimes life happens, and meeting that tax deadline isn’t feasible. A tax extension can give you up to six extra months to file your return, which is a relief when you need some breathing room. Filing for an extension is straightforward—you can submit it online or enlist a tax professional to help. Best of all? Extensions are almost always granted, and there are no hoops to jump through.

That said, an extension doesn’t push back your payment deadline. Taxes are still due by April 15^th, so while you get extra time to file, you don’t get extra time to pay.

❗When Life Gets in the Way

Most taxpayers are unable to pay taxes on time due to various reasons, including illness, death of a family member, natural calamity, and other such scenarios. That is when Insogna CPA’s team of professionals can step in to help you find your way out of the trouble with the IRS.

💵 The Cost of Delay: Penalties for Late Payments

No matter when taxpayers file their tax returns, if they do not pay the tax owed by the standard deadline, IRS penalties and interest might begin to accrue. Even if you are unable to pay taxes, filing a return is a must, as the penalties for failure to file are much more severe than failure to pay penalties.

We’ve Got You Covered—For Free!

For our clients who have engaged us to file their 2023 tax returns and need extra time, we automatically file extensions at no extra charge. It’s one less thing for you to worry about.

Looking for a proactive CPA team that does more than just crunch numbers? Let us help you navigate the tax landscape, uncover deductions, and reduce your tax bill. Contact us today to get started!

10 Ways to Avoid Accounting Horror This Halloween

To keep the financial ghouls and gremlins out of your books this fiscal year, here’s your 2024 guide to preventing accounting nightmares:

Horror Prevention Checklist:

1️⃣ Keep Software from Turning Zombie – Update your accounting software regularly to avoid it turning into a glitchy, rogue monster.
2️⃣ Ghoul-Proof Your Internal Controls – Solid checks and balances are like garlic for financial vampires, keeping any mischief out of your books.
3️⃣ Backup Before the Apocalypse – Always back up your financial data. You never know when tech troubles (or financial zombies) will strike.
4️⃣ Witch-Watch Your Cash Flow – Keep stirring that financial cauldron, and watch for any odd bubbles that might spell trouble.
5️⃣ Audits: The Ghostbusters of Accounting – Regular audits will help you exorcise unwanted financial surprises.
6️⃣ Don’t Let Taxes Haunt You – Stay up to date on tax laws so that IRS specter doesn’t pop up unexpectedly.
7️⃣ Employee Vetting: No Vampires Allowed – Make sure your employees are only sucking up knowledge, not company funds.
8️⃣ Double, Double, Two-Factor Trouble – Secure your financial accounts with two-factor authentication for extra protection.
9️⃣ Guard Your Financial Treasures – Store important documents in a password-protected vault, preferably guarded by a digital dragon.
1️⃣0️⃣ Summon Your Financial Wizards – Consult with accounting experts regularly to keep dark forces (and tax surprises) at bay.

With this handy checklist, your 2024 financial books will be free from any scary surprises—no ghouls, goblins, or gremlins in sight!

Ready to ward off accounting nightmares?

Our team of financial wizards is here to help you make 2024 your most profitable (and least spooky) year yet. Reach out today, and let’s ensure your business is as safe as a password-protected vault!