Let’s face it. Tax time can be stressful, and more stress is not what cops need. There are extra jobs and 1099’s, equipment and exemptions, and new laws to consider since the rise and fall of the perilous fiscal cliff. Unfortunately, many in law enforcement deal with divorce. That situation alone creates its own stress around tax time. Who claims the children? Who got the house and claims the mortgage interest? How does filing separately affect your tax bracket? You get the idea.
Don’t go running for your blood pressure pills just yet. I am blessed that my Dad, Owen Parker, has nearly 40 years of tax preparation experience as a public accountant. He specializes in providing effective tax strategies for a variety of personal and business reporting needs. And this year, I asked him to share with us some tips for not only reducing stress, but also for maximizing the tax filing experience.
Here are some tips to help you prepare for April 15th, along with some guidelines from his annual tax organizer that each client receives. Just remember, always consult your accountant concerning your specific needs, and consider this the usual hold harmless legal disclaimer.
1. Start early, as in right now.
By January 31st you should have mostly all of the necessary documents for filing your taxes. In the mean time, begin gathering and organizing receipts and expenses. Why wait until the deadline? Do a little at a time so you don’t go crazy.
What most people don’t understand is that even if you file for an extension, you still have to pay any taxes by April 15th. You get a delay in filing, not in paying. Don’t pay and you end up with penalties and fees. Better still, if you are expecting a refund go ahead and file so that you can get that money now.
2. Get organized, and stay with it.
Spend some time this year developing a system that works to get and keep you organized. Develop a folder for medical receipts and expenses, paycheck stubs, work related expenses, childcare payments, and so on. During the year, go ahead and file any paperwork where it belongs. Keep everything in one place, and make use of a template or organizer that can be followed. If you have a lengthy tax return or a significant amount of documents, set a date on your calendar every quarter to spend a few hours keeping things in order. Also, there are many great software programs available that can assist in making the process smoother.
3. Consult a professional to ensure maximum savings.
If there’s one place a person may be inclined to cut corners, taxes are that place. My Dad firmly believes the biblical mandate that we should “Render unto Caesar what is Caesar’s” (Matthew 22:21). But he also believes that we should leverage every possible benefit the IRS allows in saving money.
As officers, we are specialists in what we do. We know applicable laws and how to maneuver within the criminal justice system. Likewise, accountants are specialists in their field. The expense of consulting a professional may be well worth the savings received. There are many nuances and changes to the tax code that they understand.
Did you know that childcare expenses such as daycare or preschool could result in tax savings? Did you know that any tools and supplies that are required by the employer and used for work can be used as deductions (See Form 1040 Schedule A)? These supplies include ammunition, gun cleaners, weapons, flashlights, boots, and uniforms that are not suitable for ordinary wear. Union dues and dry cleaning expenses also count. If you are required to travel in your personal vehicle to a training class or other event (normal commute excluded), you can receive a mileage rate of 55.5 cents per mile according to 2012 figures.
The list goes on and on. Take advantage of every deduction possible.
4. Become more disciplined through financial training.
Tax time reveals a great deal about our spending, saving, and investing habits. We are often reminded how tight money is, or find out just how much a budget could really help. There are many training courses available such as Financial Peace University or Crown Financial Ministries that help us learn how to be more responsible with our finances. These training classes are offered to individuals or small groups, in churches, and even online. Covered Law Enforcement hosted a Crown Financial class in 2011, and received great feedback. We hope to offer another class for local officers this year.
I have been through both of the above mentioned courses. I can testify that my family is nearly out of debt because of God’s grace, discipline and sacrifices, and implementing the principles that we have been taught. I make a base salary and my wife has only worked part-time. We don’t always make a lot of progress, but we haven’t fallen into a deeper hole either.
If you are desperate every year to receive your tax refund just so you can have a little breathing room or pay off the Christmas credit cards, that may be an indicator that you need to make some changes. Perhaps things are just that tight, but most of us can do much better. Get help now, and see if tax time doesn’t become less stressful.
5. Use a tax organizer worksheet.
Every year in January my Dad sends his clients a reminder to begin tax preparations. With that letter, he always includes a tax organizer. It includes a list of items needing consideration. This list of itemized deductions includes things like medical expenses (Rx, doctors visits, medical supplies), real estate taxes, home mortgage interest, taxes on large purchases such as a new vehicle or home remodeling, energy savings for certain home windows or hybrid vehicles, charitable contributions, educational expenses (college or technical school tuition and fees), student loan interest, alimony paid or received, investments and retirement, and more.
Several years ago I typed a list of items that I included in our tax return. Each year, I begin with that document to make sure everything from the previous year is covered. Then, I review his organizer to see if there are any new applicable deductions. Having this organizer takes the guess-work and thinking out of much of the process. There’s no use in reinventing the wheel. Occasionally there are major changes in our financial situation, but for most of us the process will be very similar to the previous year.
Hopefully this list will help bring back or keep your sanity during this year’s tax season. Finances can be a key area of stress for anyone and any marriage, but especially for those serving in law enforcement. This year Covered Law Enforcement is approaching ministry to the whole person by targeting key areas of need within the profession. Be sure to sign up to receive email alerts from our blog when new posts are made, and check the website and Facebook page frequently for other great resources.
If this article has been a blessing to you, be sure to let us know and share it with someone else as well!
- Tax Considerations for Home Buyers and Sellers (dothanhomesforsale.wordpress.com)
- Six Ways To Get Organized Before Tax Time (businessinsider.com)
- IRS Offers Tax Tips by Email (whnt.com)