Money Talks, So Should You

Top 5 tax documents to have on hand before 2013

Kathryn Tuggle
by Kathryn Tuggle, Contributor (@KathrynLizbeth)

Although the 2013 ball has yet to drop and your W2 isn’t even in the mail yet, it’s not too early to start prepping your end-of-year documents and reviewing the important items you may need for your 2012 tax filing. If you’re an investor or if you’ve been through a major life change — like a change of job or home ownership, for example — getting your paperwork together is even more important. We checked in with experts to find out exactly what you’ll need to have on hand as the New Year approaches.

1)  Receipts & proof of deductible items 

If you plan on itemizing your deductions this year, you’ll need proof of those items, which can include mortgage interest paid, charitable contributions, health care expenses, and anything that will be listed on your "Schedule A" list of deductions, says James E. Poe with Texas Retirement Specialists.

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“Go online and search for tax forms and look over the schedule for those items that are currently deductible,” he says.

Gathering your expenses ahead of time is a great way to make sure you’re “maximizing your return,” says Mitch Adel, senior partner at Ohio-based Cooper Adel & Associates.

“There are a variety of expenses we should try to take advantage of each and every year to maximize our return,” Adel says.  “Make sure to include your state income taxes, mortgage interest, IRA and pension contributions, net income loss and medical expenses now, in 2012. Talk to your tax preparer about whether anything on the list would be better deferred to next year.”

2)  Life change paperwork

“Ultimately, you should be using your personal financial statements to project any life changes that occurred in the past year that would affect your tax bracket or statements,” says Karl Byrd, a certified financial planner with Security Ballew. “It’s important to look at these items now, to make the effective changes before tax rates change in 2013.”

If you sold your personal residence in 2012, you’ll need to provide your tax preparer with HUD statements on your old home (the home you sold) and your new home, (the home you just purchased), says Thomas C. Corley, president of Cerefice & Company  CPAs & CFPs  and founder of the Rich Habits Institute.

For most homeowners, mortgage interest is tax-deductible, and having a 1098 on hand will tell you exactly how much you paid last year, says Kay Bell, tax expert at Bankrate.com. 

Your lender is required by law to send you a 1098 form if you owed at least $600 in interest over the course of the year, Bell says. Other info found on the form will let you know what type of real estate taxes are owed as well as property insurance paid.

3)  Trusts and estate planning documents

Estate planning is especially important this year with the $5 million gift tax exemption expiring, says Byrd, and this may be a good time to make financial contributions to younger generations or charitable contributions.

“Year-end is always a good time to review and reflect on your estate planning goals and objectives.  This year it is especially important with the tax changes that will greatly affect personal finances,” Byrd says.

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Christopher A. Cortese with Wescott Financial Advisory Group says that before year-end is a great time to look at wills and trust documents as well.

“You’ve got to make sure you are utilizing the 2012 lifetime gifting exemption appropriately. In 2013, we are set to revert back to the $1 million lifetime gifting exemption. If there are assets that you can afford to gift now, it is a good time to review while the $5.12 million exemption is still in place for 2012,” Cortese says.

4)  Casualty loss documents

Investigate any casualty losses you may have had from Hurricane Sandy or other natural disasters, stresses Corley. Although this will affect a relatively small percentage of the population, the losses can really impact your annual income — and your taxes.

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“Detail your property damage and provide an estimate of losses incurred,” Corley says. “There is a casualty loss deduction available for individuals and businesses. Also include any insurance reimbursements received”

5)  Medical expenses

Obamacare has drastically limited the medical expense deduction. The old threshold was 7.5% of adjusted gross income, and in 2013 this threshold rises to 10% of adjusted gross income,” says Corley. “Medical expenses must first exceed 10% of adjusted gross income before any deduction is allowed.”

Medical is critical, says Adel, adding that one of the biggest areas where some families miss out on deductions are from medical expenses.

“Discovering any insurances issues or inaccuracies now, while there is still time to fix them, can save families a lot of money in April,” he says. “Don't forget that this includes Medicare expenses and a limited amount of long-term care insurance premium costs.”

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Above all, don’t forget …

Make your appointment now.

Talking to your tax preparer in 2012 means that you can plan for making any helpful changes before the end of the year, says Adel.

“This is a great time to review if there have been any other significant changes in your financial world that could affect your taxes — and help manage the impact,” he says.

When you meet with your tax preparer, make sure you bring last year’s tax return with you.

Kathryn Elizabeth Tuggle is a seasoned New York-based personal finance editor and writer who adores saving, investing and thrift store shopping. After getting her start writing about small businesses for the Inc. 500 at Inc. Magazine, Kathryn learned her way around the NYSE and NASDAQ while working at the The Financial Times. In 2007, Kathryn joined the Fox Business Network before its inception and was instrumental in launching the company's small business and personal finance sites. Obsessed with all things spending, saving and social media, you can find Kathryn tweeting her latest adventures with Dimespring at @KathrynLizbeth.