Download: 2019 Tax Planning Guide for Individuals
The holidays are a busy time for so many people. Travel, work, shopping, and family can take up practically all of your time and attention. Taxes are never fun and are probably the last thing you want to think about. However, it’s a good idea to start considering what you need for tax season before you get bombarded with W-2 and 1099 forms in late January. Preparing in advance means you give yourself more time to catch any errors or missing deductions before deadlines approach.
It all begins with organizing. There’s no need for you to guess what documentation you need. Your income may have changed over the year, and this will affect what deductions you qualify for since you last filed. Or, you may become eligible for new deductions as new provisions in tax laws take effect. If you’re filing as single, then it’s easy to make a tax checklist for individuals for 2019, so that you can stay ahead of the game.
Step 1: Begin organizing
Start first by locating last year’s state and federal returns. If you filed electronically and received or made payments to the IRS, you need to know your Electronic Federal Tax Payment System (EFTPS) PIN. It’s easy to lose track of a small but critical piece of filing information like this from one year to the next. Without your PIN, your tax filing season can go from smooth to suddenly delayed. Locate your social security number also if you don’t already have it memorized.
Step 2: Track your income-related forms
Before the year is out, start thinking about your sources of income. You should expect to receive a 1099-MISC form if you performed any contract-based work outside of your full-time job. Also, keep in mind that if you changed jobs at any point during the year, you should expect to receive multiple W-2s.
Income from your investments, broker activities, and interest payments over $10 in value will automatically produce other types of 1099 forms. Here’s a list of the most common types:
- 1099-MISC: Contract-based work
- 1099-DIV: Dividend income paid from a brokerage for stocks or other investments held
- 1099-INT: Interest paid from a bank, brokerage, or financial institution
- 1099-K: Deposits received via third-party payments providers
- 1099-B: Record of broker transactions
You should receive regular quarterly earnings statements through the mail or electronic delivery, depending on your selections. Categorize these in a folder in your inbox so they’ll be easier to find when you need them. Make sure you have all of these in before you file, so you won’t have to file a revised return if one comes in later.
Step 3: Determine your filing status
Self-employed individuals who own pass-through entities, such as LLCs, in any industry are eligible to deduct 20% of their reported net profit up to $157,500 as an individual filer. The provision was a huge bonus of the Tax Cuts and Jobs Act (TCJA). Don’t miss this one.
Individual tax filers are also able to deduct healthcare premiums as a business expense. Add these to your itemized deductions along with those you are more familiar with, such as a vehicle, home office, and travel expenses.
Step 4: Educate yourself about capital gains tax rate changes
The long-term capital gains for investments held over one year are slightly different in 2019 than in 2018. The tax brackets remain the same at zero, fifteen, and twenty percent, but the income ranges have changed. In 2018, the long-term capital gains tax rate was 20% for individuals who earned between $38,601 to $425,800. In 2019, you will pay 20% on income between $39,376 and $434,550. Short-term capital gains tax rate is equal to your ordinary income tax rate.
Step 5: Double-check effective tax rate changes
Single filers for 2019 tax year pay a tax rate of 24% if they earn between $84,201 and $160,725. In 2018, the 24% tax rate brackets applied to an income range of $82,501 to $157,500. The next several steps become critically important when using deductions and credits to recalculate your effective tax rate.
Step 6: Consider individual filer deductions and credits
Current tax law reduced the standard deduction amount but increased the list of deductions from which you can itemize. It’s worth taking 30 minutes to read what the eligible deductions are because it can save you a significant amount of money in the long run. For example, if you had the misfortune of your medical bills exceeding 10% of your gross income, you can deduct this expense. Below are some additional examples for your tax checklist for individuals in 2019:
- Property tax
- Mortgage interest payments
- Charitable donations
- State and Local Tax (SALT)
The American Opportunity Tax Credit (AOTC) allows students to deduct a portion of their tuition expenses from their taxable income. The Saver’s Credit sometimes allows you to deduct contributions to your IRA account or employee-sponsored retirement account. There are others such as remaining energy credits. Check out other IRS resources if you’d like. Deductions and credits can get a little complicated, and it can give you extra peace of mind to consult with a highly qualified tax professional to ensure that you utilizing these properly.
A final note on your 2019 tax checklist
We have only touched the surface of topics that go into tax documentation, preparation, and filing. No one wants to think about tax season during the holidays, but I think it’ll be well worth the effort. Get ahead of the game. Tax season will be here again soon. Before making any filing decisions, it’s always a great idea to ask a licensed tax professional to help you to prepare your taxes—get started with our 2019 tax checklist for individuals.
SD Mayer has licensed CPAs on staff and decades of combined experience helping individuals in the San Francisco Bay Area and beyond prepare their taxes as efficiently and precisely as possible. Contact us today to get started with an initial consultation.