Your 2016 Personal Tax Return Checklist

The year is almost over and it will soon be time to start thinking about filing our personal tax returns. Here’s a quick checklist of information and documents you’ll need to get it done. Keep in mind that individual scenarios may vary and this list covers the most common items individuals report on their tax returns. Your tax preparer will give you additional guidance that is customized to your specific situation.

Forms Received in the Mail. Starting as early as January, you will start receiving tax documents in the mail and may continue to get them as late as April. February is the most likely month you’ll receive them, however. Some of the more common forms received are as follows:

W-2: Salaries and wages from employment

W-2G: Gambling winnings

SSA-1099: Social security benefits

1095-B: Health coverage

1098: Mortgage interest and property taxes paid

1098-E: Student loan interest paid

1099-DIV: Dividend income

1099-G: Government payments (e.g. unemployment compensation, state income tax refunds)

1099-INT: Interest income

1099-MISC: Miscellaneous income (usually from contract work)

1099-R: Distributions from retirement-type accounts

1099-S: Proceeds from real estate transactions (e.g. sale of your home)

1099-SA: Distributions from a medical savings account (e.g. HSA, MSA)

Medical and Dental Expenses. Even if your medical and dental expenses are below the IRS threshold where none of it is deductible, it may be deductible on your state return. It’s worth your while to total up these expenses for the year. Qualifying expenses may include doctor and dentist visits, radiology, lab work, prescriptions, insurance premiums, and medical devices like crutches and hearing aids. For a more comprehensive list of qualifying expenses, consult IRS Publication 502 HERE.

Charitable Contributions. Gifts to charity are deductible, but documentation is required to substantiate the donation. Canceled checks or bank statements are not sufficient proof. Most charitable organizations automatically mail out letters to donors after year-end, summarizing their contributions for the year. If you do not receive one, call the organization and request one.

Job Expenses. If you pay for job-related expenses that are not reimbursed by your employer, they are deductible on your return. This can include continuing education, uniforms, travel meals, and mileage driven for business purposes. If you claim mileage, you will have to maintain a mileage log to justify the deduction. For a more comprehensive list of qualifying expenses, consult IRS Publication 529 HERE.

Expenses That Are Not Deductible. It’s also important to know what types of expenses aren’t deductible. That way, you’re not wasting time tracking something that will give you no tax benefit. Non-deductible expenses include interest on credit cards or other personal loans; political donations; vitamins and other personal care products that don’t require a prescription; commuting mileage and costs; child support payments; private school expenses; pet-related expenses; home repairs; weight loss programs; and gym memberships.

Final Thoughts. It’s better to have too much information gathered than not enough, especially if you’re handing it off to a paid preparer. Keep all your documents in one place. Also, consider storing forms and receipts electronically. It reduces the paper floating around your home and increases portability. The IRS does accept scanned documents as satisfactory evidence, so an original is not absolutely necessary anymore. Finally, consider using a money management software like Quicken or Mint to track all your personal finances. At year-end, you can generate reports in minutes to obtain all the amounts you need to report on your tax return and some even import directly into self-preparation software like TurboTax.

How NOT to Network Like a Jerk

If you look up the definition of networking, Merriam-Webster describes it as “the exchange of information or services among individuals, groups, or institutions; specifically: the cultivation of productive relationships for employment or business.” Are you doing things that are preventing those productive relationships from forming, perhaps unknowingly? Here are some ways to NOT network like a jerk.

Put Your Phone Away. Nothing says, “This conversation isn’t important to me,” more than answering a phone call or text in the middle of one. This might seem obvious, but you’d be surprised how often this happens. Unless it’s an emergency, and that does happen, keep phone activity (e.g. texting, talking) at a minimum.

Introduce Yourself and Ask for an Introduction in Return. Again, this sounds like a no-brainer. There are people out there, though, that walk up to someone, introduce themselves, give their elevator pitch, hand out their card, and walk away. If you employ this tactic at a networking event, don’t be surprised if you find a few of your business cards in the garbage by the end of the event.

Ask Questions, But Don’t Be Too Invasive. I once saw a gentlemen at a networking event ask a newly married couple if they had gotten into their first fight yet. Talk about invasive! Asking questions is a great way to start getting to know someone, but be careful what you ask. As a rule, stay away from politics and religion. Don’t get too personal either. Unless the person volunteers the information, don’t ask about marital status, if they have children or not, or what their financial situation is. It could be a sensitive topic for that person at the moment.

Don’t Be Judgmental. Mary drives an older car when she commutes around town. One time, a gentleman at a networking event saw what she drove and said, “You own a business and you drive THAT?” Pretty rude, right? It happens. What are the odds of Mary wanting to cultivate a relationship with him after that comment? The best rule is the one that most of our parents taught us. If you don’t have anything nice to say, don’t say anything at all. And remember that people have different senses of humor too.

Show Genuine Interest. Dale Carnegie said that, “a person’s name is the sweetest sound in the world to that person.” Along those same lines, people like to talk about themselves and their businesses. True, the conversation should be a two-way street, but show a genuine interest in your new connection’s endeavors. If you truly aren’t interested, graciously excuse yourself at an appropriate point in the conversation and don’t waste anyone’s time. Let that person find someone who IS interested.

Don’t Sell. As counterintuitive as that might sound, a networking event is not the time to be selling. Not a hard sell, at least. If someone wants more information about your business and what you do, they will ask. If someone has a mild interest in your product or service, they will ask for a business card. Keep in mind that, in a broad sense, everyone there is trying to accomplish the same thing you are. Do you attend networking events to buy something? Neither is anyone else.

First impressions last. People want to forge relationships with people that they like.

Looking for a good book on networking? "Stand Out Networking: A Simple and Authentic Way to Meet People on Your Own Terms" by Dorie Clark is highly recommended.

Going With Your Gut on Job Offers

I frequently say that my gut never steers me wrong, but the problem is that I don’t always listen to it. Interviewing and receiving job offers can be anywhere from nerve-wracking to exciting. It’s easy to get caught in the whirlwind and ignore what your gut is telling you. I’d like to relay a personal experience I had in the past where I ignored my gut feeling and what the end result was.

Years ago, I had a decent job with a medium-sized organization that treated its employees very well. I enjoyed working there, but realized my opportunity for advancement was limited. I was at the stage of my career where I was ready for a position with more responsibility and challenge. Once I came upon this realization, I started passively looking for a job. I reached out to my recruiters and made it clear that I wasn’t looking for “any old job” and also that I was in no hurry. I let them know what my parameters were and to call me if anything that fit them came up.

Eventually, one of my recruiters called about a high-level job opening with a small organization close to my home. The company was young, but was a wholly-owned subsidiary of an extremely large overseas corporation. The compensation package was unknown at this point, but what I did know sounded appealing and told my recruiter to submit me for consideration. Days later, I had an interview lined up.

I like job interviews. I don’t get nervous and it gives people a chance to see my personality and get to know me better. It’s an opportunity for all parties involved to see if the job will be a good fit. I interviewed with two gentlemen: the operations manager who lived in another town who oversaw local operations and a corporate accountant who lived overseas where the parent company was located. They asked me questions and I asked them a LOT of questions. I’m very cautious and wanted to ensure that if I was going to make a move, it was for the better. I don’t think either of them smiled once. It was the most uncomfortable interview I’d ever had. They were completely unreadable, which I think was the source of my discomfort.

My recruiter called me the next day. “They LOVED you!” he gushed, “They want you to come back for a Skype interview with the CFO at corporate.” That was the last thing I was expecting. I told him I was shocked because they certainly didn’t act that way. “Oh,” he responded, “I tell employers all the time to not give candidates the poker face. Candidates need to know just as much as they do that the other is interested.” I expressed my lack of interest in having a second interview. I got no warm and fuzzies from the initial interview and just didn’t have a good feeling about it in general. He talked me into going on a second interview. “What will it hurt?” he said. True enough, so I proceeded.

Let’s fast forward to the end of this process. I received a job offer. On paper, it looked fantastic! It covered all of my wants and needs: 1) a position with more responsibility and challenges, 2) a small company, which is my preference, 3) the company’s only customer was the parent company, so solid job security as far as the company’s health was concerned, 4) commute time would be reduced from 1+ hour to 15 minutes, 5) 100% paid medical and dental for me and my husband, 6) generous vacation time, and 7) a 25% increase in pay. What’s there not to like?

My gut was still screaming, “No! Don’t do it!” I accepted the job anyway because of all the things I listed above. A month and a half later, it didn’t work out and it didn’t surprise me. In retrospect, the questions that I asked in the initial interview weren’t answered…completely. The picture that was painted of the company was not a true reflection of reality. The environment and culture of the company was not represented accurately. But, I already had a bad feeling in the first place that had nothing to do with how the questions were answered. Nevertheless, I made a bad decision based on “we’ll tell you what you want to hear” answers and ignoring my gut.

But was it really a bad decision? At that point in time, I’d been wanting to start my own business for a while. This event was what triggered me to ask, “Why not? Why can’t I do it? Is there a better time than right now to start?” And start I did. I truly believe that things happen for a reason, even if the reason is not readily apparent. This started me down the road of entrepreneurship, a road I should have took a long time ago.

Back to the moral of the story. What happened to me was not fun. It was a major bump in the road of life. I should have listened to my gut, declined the second interview, and stuck to my guns. My gut was right. Now that I’m in business for myself, listening to it is going to be more important than ever. It won’t be right 100% of the time, but I’ll never, ever, be kicking myself again for ignoring it. I’d rather go with it and fail than not go with it and fail. At least I won’t be kicking myself.

So, for all you job hunters out there, employed or unemployed, listen to your gut. Even if the offer is good, the pay is better, the benefits are better, it’s closer to home, or whatever, if your gut is screaming out “No!” and you don’t have genuine excitement about the offer, please consider turning it down. Sometimes, the word “no” is the most liberating and happiness-inducing one of them all.

Getting Ready for Tax Time

Whether you do it yourself or hire a professional to do it, the key to preparing a tax return is complete and accurate information. This article is geared towards individuals who have a low to medium financial complexity. Let’s break down what you need in two simple categories: income and expenses. Please note that there are exceptions to everything and these are general, high-level guidelines. Consulting with a tax professional is always the best course of action to avoid mistakes and misstatements.

Income. Any money coming in the door usually has to be reported. Exceptions include, but aren’t limited to, child support received and life insurance proceeds. For the most part, you will be provided a form reporting your income. If you work for a company, you’ll receive a W-2. If you have investments and received a distribution, interest, dividends, or capital gains, you’ll receive some type of 1099. Unemployment income is reported on 1099-G. There are more income scenarios, but the point is that the work is done for you. Simply retain all tax documents you receive and report them in the proper section on your return.

If you receive alimony, you will not receive any type of form. You still, however, have to report it. Ex-spouses who pay alimony get to deduct the payments from their income. In turn, the recipient adds the same amount to their income. And yes, the IRS does check to see if the amounts match.

If you perform any part-time or full-time freelance work or have a sole proprietorship, all income generated from your work must be reported as income. In many cases, you’ll receive a 1099-MISC if a business paid you more than $600 in a calendar year. Business income is beyond the scope of this article, but I wanted to highlight the fact that all income is reportable regardless if you received a year-end form or not.

Expenses. It’s mostly up to you to track your tax deductible expenses for the year. You will, however, receive a 1098 for student loan interest paid and mortgage interest/property taxes paid. If you pay your property taxes directly, it will not be reported on the 1098.

Medical and dental expenses are one of the more common deductions. Keep track of payments made for non-employer health and dental plan premiums, doctor/dentist visits, lab work, radiology, and prescriptions. Retain bills and receipts to support your deductions. Payments made on a credit card DO count even if you don’t make a payment on the credit card until the next year. You may also deduct mileage for travel to and from medical and dental visits as long as you keep a log of your mileage. Items that aren’t deductible include over-the-counter medications (except insulin), vitamins, and personal care products.

The other common deduction is charitable donations. Monetary donations are deductible as long as you have written acknowledgement from the recipient of the donation. Canceled checks aren’t sufficient anymore. If you donate items, ensure you assign a conservative fair market value for the items. This is a hot button for the IRS so my recommendation would be to err on the side of caution and don’t be too aggressive with your valuation.

Finally, you may deduct money you spend on job-related expenses only if your employer did not reimburse you for those expenses. For example, if you work in construction and your employer gives you a $50 allowance to purchase work boots and you spend $75, you can deduct $25 on your return as a job-related expense. Mileage driven to and from work is not deductible.

I hope this brief entry helps make this and future tax seasons a little less stressful for you. As always, I recommend using a personal money management software, like Quicken, to track expenses. Not only is it a great tool to understand how you’re spending your money, but it generates reports to quickly obtain the numbers you need to complete your tax return.