With football season officially over, it’s time to touchdown on your 2016 taxes. For some – who are scrambling to collect W-2s and 1099’s and assembling write-offs to prepare their tax returns – this process can be stressful and daunting, especially with constant changes from the IRS.
UC San Diego Extension instructor Akore Berliner, a CPA specializing in business and real estate taxation, takes some of the guesswork and anxiety out of individual tax returns, and offers some tips and trends to help you best prepare for a smooth and easy filing.
Audits are on the rise: The IRS is hiring more staff and increasing its audits, especially on small businesses, which are starting to see notices even on $1,000 items. “When preparing your own tax return, sometimes people make mistakes that get them audited; a lot of those happen by writing things off you shouldn’t have or it was prepared wrong,” Berliner said. “If you’re unsure at all, utilize resources that are available and get a consultation. TurboTax has a hotline you can call and talk to a CPA. The IRS will even answer questions for free. The IRS website is actually amazing.”
Cyber security and identity theft: Berliner advises taxpayers to ensure the security of their computer networks when filing taxes. Passwords on computers, for example, can prevent fraud and relieve a lot of headaches and stress. “The biggest issue we are seeing is protecting our clients’ data,” she said. “Someone can hack into your Wi-Fi and get right into your network. I’ve had so many issues where a hacker had filed a fraudulent tax return for a client by getting their social security number. The IRS is cracking down on that, but people still need to cautious of their sensitive data. The thieves are out there. It’s easy money for them.”
Earned Income Credit increase: The maximum allowable Earned Income Credit will go up modestly in 2016. For those with three or more qualifying children, the maximum credit will increase by $27 to $6,269. Those with two children will get a maximum of $5,572, which is $24 more than in 2015. One-child families can get up to $3,373, which is $14 more than last year. Those without children will see a $3 increase and can claim up to $506 for 2016.
Charitable donations: Don’t forget to keep track of your charitable donations and receipts throughout the year. Even if your donations add up to $1,000 for 2016, you could receive $300 extra on your tax bill, Berliner said.
Education credits: Keep in mind that student loan interests and tuition expenses are also great write-offs that many people forget. Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify for the American Opportunity Tax Credit to help pay for college expenses.Taxpayers may be able to deduct up to $4,000 for tuition-related expenses for themselves, their spouse or a dependent.
Berliner, who has been a tax accountant for 17 years, teaches three UC San Diego Extension tax-related courses, including Federal Individual Income Taxation which includes an overview of federal individual income tax law and procedures. The course covers topics such as taxable entities and tax calculations, filing status and exemptions, gross income inclusions and exclusions, business and personal deductions and losses, depreciation and tax credits, and property transactions. A brief review of California tax coverage is also included, with an emphasis on tax law and tax planning, rather than on tax preparation.
Berliner takes a no-nonsense approach with her students by offering basic, useful tools for filing individual tax returns.
“I try to do a high level view so they can understand it in an aggregate form. I really want to make it relevant and interesting for them. In reality, taxes are interesting, especially the individual taxes because it impacts everybody,” she said. “A lot of my students are getting their CPA license, but I try to make it as simple as possible. I want them to understand the concept rather than the mechanics. After taking the course, they even feel more confident doing their own taxes.”
For more information on UC San Diego Extension’s Taxation certificate and other related courses, visit extension.ucsd.edu/tax.