Tax Tips for the New Year
The new year is a time to appreciate family and friends. It’s a time to reflect on life’s twists and turns. It’s also a time to look forward, and focus on your tax goals in the up-coming year to make certain that you are able to keep as much of your hard-earned money as possible.
From a tax perspective, the beginning of a new year is the best time to identify and correct bad habits, take stock of your current financial situation, and set goals to help you stay better prepared when it comes to filing your taxes. After all, New Year’s tax resolutions shouldn’t be overlooked.
With these tax tips you’ll be sure to plan ahead, stay tax alert, and save a bundle of money on this year’s income.
File Your Taxes and Pay On Time
This article would not be doing the reader justice if there was no mention about finalizing last years taxes. Just because the calendar says 2012, don’t forget about all of the work yet to be completed from the 2011 tax year.
Yes, April 17th is the last day to file taxes. Yes, we are sometimes held hostage as we wait for every piece of tax information to be mailed to us. Yes procrastination can be a sultry temptress. But nothing feels better than taking care of your tax paperwork and getting everything filed and paid on time.
Plus, with TurboTax you don’t always have to wait for your tax documents to arrive. TurboTax 2011 transfers information from more than 400,000 employers, banks, and financial institutions so you can automatically access your tax information, accurately and quickly. With this feature, you may have all the information required to file your tax return and receive your tax refund before people receive their tax information in the mail.
Double-Check Your Income Tax Withholding
Remember when you were hired and you had to fill out that W-4 detailing just how much money you wanted to withhold from your paycheck for income tax purposes?
Well, if you got hit with a tax bill last year and your income and deductions did not change, you probably need to double check your withholding amount and make sure that you’re not taking too little out.
If you’re not withholding enough money from your paycheck, then it’s almost a guarantee that you’ll owe on your tax return instead of receiving a tax refund. The Employee’s Withholding Allowance Certificate (Form W-4) will allow you change your withholding amount by changing your claimed tax exemptions.
Prepare, Organize, and Keep Excellent Records
Nothing will help you stay on top of your taxes better than developing an excellent strategy of preparation, organization, and record keeping. It may sound dull, but the benefits can save you a bundle of money.
Keeping tax information organized and well-documented can not only help you avoid owing more taxes in April, but it will arm you with piles of necessary information in the unfortunate event of an audit.
Using a tracking system like Quicken throughout the year is a great way to keep track of income, payments, expenses, and deductions. Not only is such a system convenient and easy to use, but Intuit (who makes Quicken and Turbo Tax) has made the transfer of information from Quicken to Turbo Tax virtually seamless.
Don’t Overpay for Unnecessary Tax Preparation
You may think your taxes are complex and find it necessary to go to a tax store to prepare your taxes, but you don’t have to overpay to have your taxes prepared. Tax software like TurboTax makes tax preparation easy with step-by-step guidance.
TurboTax gives you all of the tax deductions and credits you deserve in compliance with IRS tax laws, giving you your maximum tax refund. What’s even more extraordinary? TurboTax now offers free, one-on-one tax advice from highly qualified tax professionals who are CPAs, Enrolled Agents, and tax attorneys.
Make Estimated Payments
For those of us who are self-employed, making estimated tax payments is a very smart way to stay ahead of the tax game. And, if your income is high enough, the IRS can even require estimated payments to be made. Instructions about estimated payments can be found on Form 1040-ES.
Regularly Contribute and Donate
If you have an IRA, 401k, 529 plan, or any other savings/investment accounts, be sure to find out what the maximum yearly contribution limits are and develop a monthly deposit plan to ensure that you can maximize the benefits of those accounts.
Also, consider giving to charity on a more regular basis. Many people/businesses wait until the end of the year to make charitable contributions. But you don’t have to wait. Not only do many qualifying organizations have automatic monthly donation systems, but many charities need financial assistance throughout the year, not just in November and December.
Whatever your plans may be, if you can find a way to incorporate these tax tips into your tax life, you’ll be better suited to take on whatever tax-related situations come your way.