- A new law gives the IRS more resources to enforce tax compliance, so it’s important to avoid errors and keep documentation for all expenses.
- The limit for mortgage interest deduction is now $750,000, and deductions for state and local taxes are capped at $10,000
- Reporting self-employment income or losses on Schedule C can increase IRS scrutiny, especially if you claim expenses for a home office without adequate documentation
- You can reduce your taxable income by contributing to a retirement account, such as an IRA or a 401(k), or by donating to a qualified charity.
- Double-check information from W-2s and 1099s, especially the cost basis for securities you’ve sold. Verify you have included all of your income, including salary, dividends, interest, rental income, capital gains, foreign income and crypto transactions.
- Keep receipts, invoices, mileage logs, bank statements, and other records to support your claims.
- Use the IRS Tax Withholding Estimator to check if you need to adjust your withholding or make additional payments.
- Consider donating appreciated securities instead of cash to a qualified charity. You may be able to deduct the fair market value of the securities and avoid paying capital gains tax on the appreciation.
- File an extension if you need more time. You can get an automatic six-month extension by filing Form 4868 by the due date of your return. Taxes are still due on regular filing date.
- Seek professional help if you have a complex tax situation or need guidance on specific issues. A tax professional can help you avoid costly mistakes and find solutions tailored to your needs.
Reporting Foreign Financial Accounts and Assets
A U.S. person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report a financial interest in or signature or other authority over at least one financial account located outside the United States if the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
Certain U.S. taxpayers holding foreign financial assets with an aggregate value of more than the reporting threshold (at least $50,000) must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The reporting threshold is higher for certain individuals, including married taxpayers filing a joint annual income tax return and certain taxpayers living in a foreign country.
Those who don’t file an FBAR / Form 8938 when required may be subject to significant civil and criminal penalties that can result in a fine and/or prison.
References
File an extension using Form 4868 (IRS Link)
BSA E-Filing System (treas.gov) – File FBAR
Form 8938 (irs.gov), Statement of Specified Foreign Financial Assets
