6 Tax Tips That Investors Need to Know

Watch the mail – if you haven't already, you'll soon start to get a rush of year-end statements ^[1], 1099 forms and, if you're employed, a W-2.

That's right – the tax season is getting under way. And, as they do every year, experts urge taxpayers to start early to reduce the chances of making a costly mistake and to get a refund as early as possible. Happily, the deadline is April 18 rather than April 15, due to Emancipation Day and the weekend.

If you do your own taxes, you'll be glad to know there are few dramatic changes for the 2015 return. Small inflation adjustments have been made to tax brackets and various thresholds.

Still, there are always ways to go wrong, so here are a few tips the pros say may be especially valuable this time around.

"My No. 1 piece of advice is to get it done and filed before the end of February," says Lee Frush, a certified financial planner with Atlanta-based Cornerstone Financial. Turmoil in investment accounts has created huge stress for many of his clients, Frush says, making it especially important to minimize stress over taxes.

"Make it a goal. Get it done and save yourself any further worry," he says.

Jim Rose, director of assurance services for the Purk & Associates accounting and advisory firm in St. Louis, offers another reason to file early: cybersecurity.

"The longer you wait to file, the more you will be at risk of having someone fraudulently file under your Social Security number and perhaps obtain your refund," he says.

Among the tax issues of note this year:

Same-sex couples can file in every state. Perhaps the most dramatic change is the expanded right of married same-sex couples to file a joint return no matter what state they live in, due to last year's Supreme Court decision allowing these couples to marry in all 50 states. In addition to reducing paperwork, that will give same-sex couples access to benefits, such as sharing tax losses on investments, or allowing a non-working spouse to have an IRA. Just remember that you are both accountable for mistakes on the return.

Obamacare penalties have increased. The penalty for not having health coverage, a requirement for most under the Affordable Care Act ^[2], has gone up. The top penalty for an uncovered adult rose from $95 in 2014 to $325 in 2015, and will be even higher in 2016. Keep in mind that if you have an Obamacare policy, you must report life changes such as having a baby, getting married, getting a job or losing a job.

Wall Street volatility may impact returns. Though stock prices ^[3] were down only slightly for 2015, that flatness masked a lot of ups and downs. Investors unlucky enough to have sold during a dip – like retirees pulling out money for living expenses – should look hard for tax losses to offset other gains or to reduce reported income. It's too late to realize losses for 2015 by selling losers, but if you sold investments during the year, some losses may be lurking in your records unnoticed. If losses exceed gains, some can be used to reduce ordinary income and trim your income tax.

"For tax year 2015, the most [one] can deduct in capital losses [against income] is $3,000," says Mark Jaeger, director of tax development from TaxAct, a tax-prep software company. "While this limit isn't new, it may be more likely to come into play depending on how investors navigated the ups and downs of the market last year."

There are still IRA opportunities. Taxpayers have until the filing deadline to make IRA contributions ^[4] for 2015, and it can be a valuable move, especially if you qualify to deduct your contribution.

Some taxpayers can get a double benefit by using an IRA contribution to reduce their tax bracket, Frush says. In his example, a couple filing a joint return with an $86,000 income would be in the 25 percent bracket. If each spouse made the maximum $5,500 contribution, joint income would drop to $75,000, putting them in the 15 percent bracket.

Moving expenses are deductible. Increased hiring in 2015 means more taxpayers will owe taxes on moving expenses ^[5] paid by their employer. Those are considered income and are reported on the W-2 form.

"In some cases, the bumped-up income number is sizeable, and knocks taxpayers into new tax brackets and out of some credits," says Rebecca Spencer, a relocation expert with at Esperance, a relocation management firm. Calculations can be especially difficult on state returns.

Best, then, to leave time to find ways to reduce income, like making that tax-deductible IRA contribution for 2015.

Consider a Roth conversion. It may seem early to think about your 2016 tax bill, but many experts urge taxpayers to consider a Roth conversion in light of the stock market downturn at the start of the year. In a traditional IRA, investment gains and contributions that were tax deductible are taxed as ordinary income when withdrawn, while withdrawals from a Roth are tax-free.

Investors have the right to convert a traditional IRA into a Roth ^[6], but must pay any tax due at the time. Typically, a conversion makes sense if you expect to be in a higher tax bracket in retirement than you are now, since you can pay tax at today's lower rate to avoid a higher tax later. Now is an especially good time to consider it, because the drop in stock prices would reduce the profits you'd report, minimizing the tax you'd owe on past gains. Your broker, bank or mutual fund company can explain th e steps.

"If you planned to convert a specific dollar amount of your traditional IRA in 2016 and your underlying mutual fund prices have fallen since the beginning of the year, a greater number of shares will now move into the Roth IRA for that same dollar amount," says Brian Lowe, account supervisor at Summit Financial Corp. in Burlington, Massachusetts. "When the market recovers, your appreciation will now be realized in an account that can ultimately be withdrawn tax-free."