End of Season Tax Tips from Our Expert Bloggers: Part 1
With the tax deadline just days away we turned to our expert bloggers to find out some of their favorite end of season tax tips. If you haven’t filed your taxes yet you can go online and still take advantage of these great tax tips so you can keep more of your hard-earned money before the tax deadline. Stay tuned for part 2 of end of season tax tips from more of our expert bloggers.
Michael Rubin CPA, CFP- Total Candor
My favorite end of season tax tip is the “once (again) over.” While your tax return should be completely accurate throughout, you should double check a few things before you send your tax return to the IRS in a rush the night of the 15th. Make sure at least the following are 100% correct:
- All Social Security numbers
- All wages and withholding from the W-2’s you received. Double-check your employer’s EIN too while you’re at it.
- The total gross proceeds from all of your investment sales, if you have any
- Mortgage interest from Form 1098, it you itemize
- The routing and account numbers of your bank account if you are expecting a tax refund or if you will have your payment due automatically withdrawn.
My favorite end-of-season tax tip is to make a contribution to a Traditional IRA before you file. If you are eligible to make a tax-deferred contribution to a Traditional IRA, and you do so before you file your taxes, the contribution can be designated as previous year. Meaning, you can deduct the current year contribution on your tax return you are filing for the previous year. For example, a $5,000 contribution to a Traditional IRA on April 15th, 2013 would net a $1,250 deduction from someone in the 25% marginal tax bracket on his or her 2012 tax return. This is a great way to save for your retirement and save on taxes at the same time.
Maintain a list of all the documents you received this tax season. This will help you remember to include important documents this year if you haven’t yet filed and next year as the documents start coming in the mail and you wonder whether or not you’ve received everything in order to do your taxes. You should have a list of every institution that sent you a 1099, such as 1099-INTs from all your bank accounts that paid out interest, as well as other forms such as K-1s from partnerships and W-2s from your employer(s). Then, as the documents come in, you can use your list as a checklist to see who else is left. Remember to amend that document if you close accounts or add new ones.
Once you file your 2012 tax return, you won’t need many of the documents you used anymore. Scan them and shred the paper copies. If you are a little paranoid, keep the paper copies for, at most, six years (that’s the period of limitations if you fail to report income) and then dispose of them. Having an electronic copy is almost always as good as a paper copy so scan, shred, and recycle the old documents. When you scan them, make sure to store them in a secure location with adequate backups.
With the peak of tax season just about wrapped up, my tax tip for everyone is to review and automate. Once our taxes are submitted and we take a week or so to get our minds off of them, we then plan ahead on how we can improve for filing next year.
Using TurboTax for the last few years has actually made it easier to look over all the numbers and we can compare how did this year to how we did last year. Since we file for both personal and business, I use that data as motivation to be more organized with so I can find all the receipts and paperwork I need.
On the personal side we need to have a system for our donation receipts for when we go through possible deductions that we may qualify for. As for my business, I have to refine my storage so I can pull out supply receipts easily come tax time.
Besides keeping receipts our review for the past year showed that we can invest a little bit more for our long term future. We’ll taking advantage of starting our toddler’s college fund and contributing more to both of our IRAs. Having this review also meant that we shopped around to found a brokerage that can manage our IRAs with lower costs than we’re currently using. Hopefully by the end of the month we’ll have that all finished.