There are many happy occasions at this time of year – graduations and weddings, in particular. Steven B. Zelin, CPA, Managing Member at Zelin & Associates CPA, a full-service accounting and auditing firm based in New York City, offers some tax and financial planning advice.
“For those who are graduating, you should start planning for any potential lean years. The current financial environment means jobs are still scarce and starting out in the workforce will be a change,” says Mr. Zelin. “Consider finding a financial planner to help you manage your own finances and explain the tax codes as they apply to the just graduated young adult. Finding your own tax preparer is of equal importance, although you might consider the CPA who is preparing your parents returns.”
Mr. Zelin also encourages the organization of receipts and tax documents as ways to minimize your taxable income, and maximize any deductions and credits that may be available to you. He offers these specific tax tips for college graduates.
- Organize tax documents in one place: Tax preparation requires a lot of paperwork. Gather and organize all your important tax documents in one place. Go digital with google drive or drop box with digital folders. If you’re old school, simple folders or large envelopes will do.
· Student loans can help at tax time: Student loan debt often follows four years of college. You may think repaying yours is a pain, but your student loan can benefit you at tax time. That’s because some of the interest you pay on your student loan could be tax deductible. Get online access to your loan information.
· Continuing education can be Credit Worthy: The rapid pace of the business world may mean you have to start taking classes to keep up your skills almost as soon as you start working in your first job. Compare the different education credits.
- Look for ways to reduce your taxable income: Reducing your taxable income can reduce your tax burden, and could even lead to a bigger refund. There are multiple ways to reduce your taxable income, and three of the most common and most useful for newly graduated young professionals are:
- Retirement accounts: Saving for retirement by contributing to a 401k plan helps reduce your current year’s taxes. When the investments you make through your 401(k) earn you more money, you won’t pay taxes on that income until the day you withdraw it. At that time, your tax will be based on the tax rate for your tax bracket (i.e. during retirement), which may be less than your tax rate now while you’re working full time. The IRS puts limits on how much you can contribute to your retirement plans (401(k), IRAs, etc.) in a single year. It pays to check out the limits, so you know exactly how much you’re allowed to contribute.
- Health Savings Accounts (HSAs) and Flexible Savings Arrangements (FSAs): HSAs and FSAs are two ways to manage healthcare-related costs while gaining some tax benefit.
- Charitable donations: Donating to charity is another great way to reduce your taxable income, while also doing something good for others. Make sure you have proof of the donation. This can include a canceled check, credit card receipt or receipt from the eligible charitable organization you donate to. Make sure the receipt shows the date of donation. For tax year 2020 the IRS allowed cash donations to be deducted by anyone who did not itemize their deductions.
· Most of all, remember to:
o Spend less than you earn.
o Save some money from each paycheck.
o Evaluate all repayment options on student loans.
o Avoid credit card debt. Your credit history is a lot like a college transcript; it will follow you forever and impact your future.
If you are going to be married, your tax status will be changing. Love is the primary motivation but planning the wedding involves your taxes and you should be aware of the best ways of financial planning and estate planning for your personal situation.
“Weddings are expensive; it’s unfortunate that they aren’t tax deductible,” says Mr. Zelin. “Though tax write-offs may not be top-of-mind when you are planning your wedding, with careful planning, there are some ways you can garner a tax deduction or two as you prepare to head down the aisle. Here are some ideas.”
- The church: If you are paying a ceremony fee, it may be tax deductible. If not, ask whether the church waives ceremony fees for members who donate at a certain level. It may be worth upping your donations for the year to get a triple benefit: a fee waiver, a tax write-off, and a warm glow from donating to a good cause.
- The venue:If you are having your reception or getting married at a historical garden, museum or homestead, or even a state or national park, the fee you pay may be tax deductible as a donation. Check with the site representative for more details.
- Flowers: Once your wedding is over, have a friend take the flowers to a homeless shelter, women’s center or similar non-profit organization. Not only will you have done a good deed, but with a receipt, you’ll be able to take a tax deduction for the value of the items donated.
- The gown: Donate your wedding gown to a non-profit organization such as Making Memoriesor Brides Against Breast Cancer, and you’ll help others enjoy their special day in style. The same goes for the flower girl and bridesmaid dresses, as well as candles and other decorations that won’t spoil.
- Wedding favors: Instead of soon-forgotten trinkets, make a donation to a charity on behalf of everyone at your wedding as a “thank you” for them being a part of your special day. You’ll help others while garnering yourself a tax deduction. You might even let your wedding party choose the charities they treasure.
- Gift registry: Along with a traditional gift wish list, you can create a charity registry through MyRegistry.com and encourage guests to donate to your favorite cause. Donations are tax deductible so your guests can feel good while giving back and celebrating you at the same time.
“Be sure to document these wedding write-offs with receipts and contracts to have the backup available at tax time,” Mr. Zelin stressed. “Most of all, be sure to contact your CPA as you plan for any major life event.”
Steven B. Zelin became a licensed CPA in 2000 and has demonstrated his expertise as a top financial professional. He is an active member of the New York State Society of Certified Public Accountants and serves as Chair of its Career Committee. He is a member of the American Institute of Certified Public Accountants and its Peer Review Committee. He is also a member of The Accountants Club of America, a prestigious group of accountant members that fosters the exchange of ideas to enhance the development and growth of the profession. The Accountants Club encourages the professional development of its members to better serve their clients and the community.
He has been an Adjunct Professor of Accounting at Long Island University and Baruch College.
Mr. Zelin has educated the public about the accounting professional through his role as The Singing CPAⓇ, now a registered trademark. His sense of humor added to his songs, Tax Deductible, Dear IRS, If You Don’t Like Paying Taxes, Audit Client Blues and others featured on his CD, The Singing CPAⓇ introduced in 2008.
Mr. Zelin may be reached directly for further information at 646-678-4496, x101 or email@example.com