End of Year Tax Tips for First Time Filers
Few things offer you more security and peace-of-mind than being well-prepared. For us tax nerds, you might say that sentiment is even more true about income tax preparation. Most American adults have April 15 etched into their brains forever, but let’s not skip over the second most important tax date – December 31.
We’re approaching the end of the year, and in a effort to save you plenty of time, frustration, and even some of your hard earned money, we’ve assembled some very useful and insightful advice to help with your end of year tax planning.
Knowing Your Dates and Deadlines
It’s important to keep in the forefront of your mind that, although the filing deadline is April 15, you’re actually filing your income taxes for the previous year – January to December. It sounds like common sense, but it can get tricky at times to remember this small detail.
Reminding yourself about tax deadlines not only motivates you to get a head start, but it helps you stay focused and organized – which is always a good thing.
If you want to get a jump on your end of year tax planning (and not wait until April 14 to get everything together), use a checklist for your W-2s, 1099s, and other employer paperwork that you’re expecting from of all of your sources of income over the previous year.
Trust me, it’s easier to remember your 2012 income while it’s still 2012, and not in April 2013.
Investing and Giving
Another important aspect about end of year tax prep and planning is the December 31 deadline for investments or charitable contributions. Unless the government issues a specific law about an extension, you can be assured that December 31 is the cutoff date. This means that any payments, contributions, or giving on January 1 won’t offer you a tax benefit until 12 months down the road with the exception of IRA contributions.
If you’re always kicking yourself in April for not making smarter financial decisions during the previous December, kick that habit this year by making the maximum contributions before this year is up and lower your tax bill.
Some things to consider are: making the maximum contributions to your IRA, 401(k), and your child’s 529 college savings plan, or finding a church or charity to help with your donations or financial gifts. It’s a good idea to research the charity you choose and make sure to keep your paperwork and receipts.
No matter how much you usually put off filing taxes, remember that preparation and end of year tax planning will reduce your frenzied April frustration while helping you stay organized and focused.