Author’s note: I regret the error in my email address published with the most recent edition. The correct address is posted at the end of this article.
This is the fifth column on building a Roadmap for your executor/heirs in the event you are incapacitated or no longer here. I encourage you to consider these kinds of preparations if you havenât already.
The first four articles on Family Matters cover a variety of suggested steps you can take. If you missed any or all, they are archived at mysundaynews.com; you can contact me at the address below, and by return email, I will send you copies in Microsoft Word.
STEP FIVE: Income Tax Data. We all know there are two things for certain, and one of them is taxes. It is critically important that youâre affairs are organized, when it comes to satisfying Uncle Sam.
Your Roadmap should contain sufficient information so your survivors can prepare tax returns with as little research as possible. They will need access to income and deduction information. Of the two, income data will most likely be the easiest to obtain, as virtually all sources are required to provide year end documents by January 31. If you have income from self-employment, it is incumbent on you to provide the data necessary for preparation of Schedule C and the appropriate SE 1040 forms. If you receive a K-1 year-end report, you should note that as they tend to arrive late.
The biggest challenge will be properly documenting any tax deductions you have coming. Recognizing that some use the standard deduction, and if youâre certain that will be the case, this type of record keeping may be a moot point. (For the year 2014 the standard deduction for a joint return is $12,400, for a single $6,200).
However, if you plan to itemize (or even think you might), you need to record tax deductible expenses as the year progresses. Some are easy to track such as the property tax bill, which should be in an envelope clearly marked âtax deductible expenses.â Most charitable organizations send year-end statements, which helps, but be sure to keep track of any donations to Goodwill etc. and keep those receipts also stored in the âtax deductible expenseâ envelope. Be sure to record miles driven for charitable purposes; the IRS allows a deduction of 14 cents a mile (for 2014).
The main job, if you itemize, is to track your âout of pocketâ medical expenses. All of those expenses in excess of 7.5% of your adjusted gross income are tax deductible. (Beginning in 2017 it will be raised to 10%.) You probably already know, but just in case you donât, the following are all legitimate out-of-pocket expenses: 1) All insurance premiums including Medicare, Medicare Part D, Medicare Supplemental, and Long Term Care. 2) All prescription co pays, optical, and dental bills not covered by insurance, and 24 cents a mile for every mile driven to the doctor, dentist, hospital, or drugstore also qualify. (We recognize that most major pharmacies do provide year-end printouts upon request, which will quantify your prescription co-pays). The rest of the information needed for medical expenses will be harder to gather without your ongoing record keeping.
If you donât track these expenses as they occur, it means someone will have to âscrambleâ to gather the information, increasing the likelihood that some legitimate deductions will be missed.
Our next column will provide a closing summary.
Questions or comments tsansom2002@gmail.com.
