I used to do our taxes myself. But, since we started a business (flipping foreclosures) in ’05, we’ve had a tax accountant. I felt like I was in over my head and knew it was time to seek the help of a professional. I still keep close track of everything and prepare all our documentation pretty meticulously, so that his job takes as little time as possible (because, he charges by the hour).
Last week he downloaded our return to Sharefile (a cool application). I always try to go through our returns with a fine tooth comb. A) I want to make sure nothing I reported got overlooked; and B) I want to understand everything. (One of these days I’m afraid he’s going to start charging me for all the questions I ask. ;))
I noticed that, this time, we only qualified for a $2,000 tuition and fees deduction. Last year it was $4,000. Checking out Form 8917 I saw that we were only $772 above the income threshold to qualify for the $4,000 deduction. So, there was a huge incentive to make sure I hadn’t forgotten some expenses – something very easy to do with the rentals we have.
Indeed, we sold a property to our tenants in November, but not before they had withheld rent in the amount equal to the garage door they replaced without telling us. (Note: this was a unique situation where the tenants used to own the house before they went into foreclosure in 2006. We redeemed it, kept them as renters with the intent that they would buy it back. The conditions of their lease required them to pay for repairs and maintenance.) Anyway, in order to not mess up the sale, we agreed to pay for the $900+ garage door and got a copy of the receipt from them. I, however, neglected to include it as a repair on my spreadsheet.
So, this time, it wasn’t our accountant who had overlooked/missed something. It was me. I’m 90% sure I would have remembered it at some point – but possibly not. And, if I did, it would involve filing an amended return – something I’d really like to avoid!
Anyway, I’m pleased I caught it. And I’ll probably go over everything one last time, just to make sure I haven’t missed anything else. I sort of stopped looking once I discovered this one oversight. I’m also pleased about the process that led me to catch it; that I noticed a smaller deduction and read the small print and realized how close we were to the income cutoff and decided to scrutinize everything. I feel empowered.
Knowledge does that for you!