Early Tips For Tax Day

As many people begin to receive their W-2 forms, host Michel Martin and accountant David Baldoza discuss tips on getting a head start on filing taxes.

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MICHEL MARTIN, HOST:

Now, switching gears to matters of personal finance, a lot of us are looking forward to spring. I don't know anybody, though, who enjoys one of the rituals of the season: filing taxes. This year, the deadline is April 17th, but that pair of extra days probably still won't keep a lot of us from scrambling to file at the last minute.

So for our Money Coach conversation today, we thought we'd give you a head start. Joining us to share some tax tips for jumping on top of this rite of spring is David Baldoza. He's a senior accountant with Hobe & Lucas. That's an accounting and financial service company in Cleveland.

Welcome. Thanks so much for joining us and happy New Year.

DAVID BALDOZA: Happy New Year. Thank you very much for having me on.

MARTIN: So let me just start by just stating the obvious, that a lot of people just - taxes just makes their head hurt. You know, they just hate the whole idea and so probably that's one reason why they put it off as long as possible.

Is there something that people should be doing right now to minimize the pain at the end of the process?

BALDOZA: Well, it's never too early to start getting organized, Michel. You'll start getting your forms in already, and in the next few weeks, you should have most of them, by the middle of February. So as they come in, it's good to set aside a space to organize those documents and keep them handy so that when you're ready to do your own taxes or if you decide to hire a preparer, they'll be there, they'll be organized and everyone can get done a little more quickly.

MARTIN: Now, obviously, there are some people who are used to this idea, the EZ form, and there's people who itemize and there are people who don't. Is there a rule of thumb determining whether you should consider itemizing or not? Especially because that short form looks so tempting. I could just be done.

BALDOZA: Yes.

MARTIN: Just throw it in there. But are there people who definitely should itemize?

BALDOZA: Well, let's talk about the standard deduction for just a second. That's basically a government freebie and it is to give a deduction to those who don't have the types of deductions necessary to itemize. And those itemized deductions would be primarily mortgage interest, real estate taxes, state and local income taxes, charitable contributions and the like.

And a lot of folks who don't own a home or don't live a state that has high state or local income taxes may not have enough itemized deductions to do that, but those are the big ones.

MARTIN: So a mortgage, something like that. Now, are there items that you can itemize that people commonly forget? I'm not talking about your swimming pool in the Cayman Islands. Okay? So let's just put that to the side. I'm not talking about your second house in Maldives. Okay? That's not what I meant.

BALDOZA: Well, they can deduct mortgage interest on more than one home. They can also deduct their primary mortgage interest, and, to a degree, their home equity interest. So they may have two mortgages that they may be able to deduct on their tax return and additional real estate taxes. And a lot of the employee business expenses often get glossed over because they're...

MARTIN: Well, like what? Like dues for a professional association or something like that?

BALDOZA: Sure. You have professional dues, union dues, uniforms. If you're required to wear a uniform and your company does not reimburse you for them, you may be able to deduct that on your return, and there's also home office expenses. But these are all subject to what's called the two percent of AGI limitation, which is why they're not available for everybody.

So you have to calculate your income and then you have to take two percent of that and that amount will be disallowed from those certain deductions.

MARTIN: Okay. What about people who made very little? For example, if you - are there deductions for people who maybe received unemployment for part of the year?

BALDOZA: Well, the deductions for folks who don't make a lot of money are typically the standard deduction and there is also the personal exemption that almost everybody gets, so you can take your income and lop off the first, you know, $8,000 to $12,000 of income and not worry about being taxed on that. But unemployment is taxable income.

MARTIN: Unemployment is taxable income. Okay.

BALDOZA: If you collect enough of it, yes, to get over those standard deductions and exemptions.

MARTIN: What about the mileage, the stationery and the letter that you sent - for all the letters that you might have sent looking for a job? Job search expenses. Are those deductible?

BALDOZA: Yes. Those are also subject to the two percent miscellaneous itemized limitation. However, certainly, the letters you sent - any job hunting expenses to get a job in your current industry or your current - or your most recently former employment would be deductible. You can't deduct expenses to get a job in a totally new line of work.

MARTIN: Oh, you mean so all those classes I took in massage therapy, I can't deduct those?

BALDOZA: You cannot deduct expenses to meet the minimum requirement of your profession.

MARTIN: Those yoga classes? None of that?

BALDOZA: Yes.

MARTIN: Oh, no. Oh, no. That's going to be bad news for somebody.

BALDOZA: If you need to be a licensed - for example, myself. I could not deduct my CPA preparation classes because, in my industry, being a CPA is one of the minimum requirements for the industry.

MARTIN: I bet you wish you had joined me in that massage therapy class, though, don't you?

BALDOZA: I think about that a lot between January and April 17th. Yes.

MARTIN: I bet. David Baldoza is a senior accountant with Hobe & Lucas. That's an accounting and financial service company in Cleveland and he was nice enough to join us from our NPR member station, WCPN.

Thank you so much for joining us.

BALDOZA: Oh, thank you for having me.

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