Donald K. Jeffery is a tax partner and the leader of the New England tax practice at the global accounting firm, Grant Thornton. He spoke with Globe correspondent Leah Burrows about this year’s tax season and changes ahead for next year.
It’s tax season again. What should people be doing right now?
Gathering all your information is the first step. Once you’ve received all your documents, look them over — not all W-2s are prepared correctly. Make sure the information you receive matches your personal records.
Go back to the prior year. Make sure you have an inventory of what you had the prior year and roll it into the current year — whether it’s investment accounts, personal bank accounts, itemized deductions. Make sure you’re doing the same thing this year. If you’re engaging a professional to do your tax return, its always a good thing to organize.
What’s the best way to organize tax documents for the pros?
Organize your income statements in one package — put your W-2s in one space, your 1099s together, your brokerage statements. Then put anything that’s a deduction, Schedule A, in another section. If you have a personal business or business in a home, make sure that it is separately identified. It’s good practice to let your paid professional know everything that may have tax consequence. Jot it down, make a note and that will help the process.
Congress recently approved changes that go into effect next year. What should people do this year to prepare?
There are many changes coming. Have a conversation with your professional. Generally, it’s a tax increase — at least for the higher income earners. In addition to that, there is a phasing out of some itemized deductions and personal exemptions. It’s just good tax planning, anticipating additional tax liability. For most people, though, their tax rates will be affected somewhat but not terribly. It’s primarily the high income earner.
Use a pro, or do it yourself?
Software tools have come a long way. But it comes down to how complicated your situation is. Many people just don’t have the appetite to do their own taxes, they don’t want to be bothered with it. To do a tax return without any training, even with the software, does take time.
What are the biggest mistakes people make doing their returns?
The most overlooked items are the interest expense deductions. There is consumer interest, mortgage interest, investment interest, and business interest. You want to make sure you have a proper classification of the debt and the associated interest expense to have the correct treatment on your return because it can make a significant difference. So, have a good conversation with your paid professional and make sure you have really good records for support.
Another overlooked item is in the charitable contribution area, especially understanding what’s deductible, whether it is a direct cash payment or goods that you contributed to an organization. Make sure the organization qualifies as charitable. Make sure you have a receipt that stipulates from the organization at the time of the donation that the donor didn’t receive services or value in exchange for the payment.
For people working out of their home, there are lots of opportunities to get additional benefits for your home office — if you’re careful about how you allocate your home office expenses. Be careful of the rules. Make sure you have good records that you do, in fact, utilize the home office for your business. That’s an area the IRS goes after pretty hard.
What’s the craziest deduction a client has ever tried to take?
It’s usually in the area of the home office. People think because it’s physically in the office it’s allowable. People have tried to deduct fine art. Gambling losses and trips to the casinos — it doesn’t fly.
What do you think about procrastinators?
They make it tough, but we’ll do what we can to get it out. Procrastinators tend to be people who are not well organized. The worst ones come in the day of the deadline with a shoe box. Don’t be a procrastinator. Don’t scramble to get it together because that’s when mistakes happen.
What do you do April 16?
April 16 is a ghost town here and rightfully so. People need a day to decompress. My wife and I take annual trip to Hilton Head, S.C., in May.