Contribute More to Your 401(k)

Did you know you can do yourself a (double) favor by contributing more to your company’s 401(k)? How? When you opt in and have a portion of your income set aside for the account, it’s done pre-tax. That means you’re lowering your taxable income for the year while putting money aside for your retirement. It’s a win-win.

If you haven’t contributed enough to get a full match from your employer, see if you can at least increase to that amount. That’s extra money that’s free and can go a long way towards your retirement with the power of compound interest.

Take Advantage of Flexible Spending Plans and Health Savings Plans

If your employer offers a Flexible Spending Plan or a Health Savings Plan and you’ve signed up for it, make sure you’re taking full advantage of it. They are considered tax favored plans because your contributions are pre-taxed- this allows you to get reimbursed for medical expenses while lowering your taxable income. Keep good records and all your receipts. Check to make sure you’re not wasting any of your contributions by making sure you have qualifying medical expenses.

While most jobs having open enrollment in the fall, you can still keep track of your medical expenses through out this year so you can plan for the next year.

Adjust Your Withholding on Your Paychecks

Depending on your needs and particular situation, you have some choice with your withholding on your paychecks. If you received a big tax refund last year and expect your finances to remain the same this year, you may elect to adjust your W-4 and have less taken out of your paychecks. That means getting a smaller tax refund next year, but having a small bump in your paychecks through out the year.

If you’re expecting a major event this year such as getting married or becoming parents, then you should consider sitting down with your Human Resources Department to update your withholdings.

Thoughts on Preparing for Taxes

I’d love to hear from you about your taxes and finances. How was this past tax season for you? What plans do you have for the rest of 2013?

I didn’t think so.  Nevertheless, here are two key strategies to consider throughout the rest of the year in order to make next year’s filing simpler and potentially less costly.

Stay Organized

One of the more annoying parts of preparing to file your taxes is trying to locate your necessary documents and receipts received throughout the year, but if you stay organized you will make your life much easier.

Some people can spend a bunch of time just assembling all of the tax forms they receive in January or February (e.g., W-2s, 1098s, 1099s, etc.).  But that’s nothing compared to the hours they spend assembling information that they received throughout the previous year.  Such document sleuthing can include anything from discovering receipts for charitable donations and business expenses to finding the cost basis for investments they sold.

Of course, there’s an easier way: don’t wait until April to dig up all of your paperwork.  For example, when you make a donation of clothing to a local charity, don’t take the receipt and leave it on the desk somewhere to contemplate later.  Instead, fill it out right away— list what you donated and its approximate value. Put the date on it.  Put it in a folder labeled “Taxes 2013.”

With business expenses, write down the business purpose on the actual receipt right away.   For business meals, I suggest doing so while still at the restaurant.  When you fill in the tip, just write the purpose at the top of the customer copy of the receipt.  Bring it home and put it in that same “Taxes 2013” folder.  To make your life much easier if you’re a business owner, enter tax-related transactions in your accounting software as they occur.

Monitor Your Payments

As a taxpayer, your goal is to pay enough taxes throughout the year to avoid an underpayment penalty but not so much that you end up providing a sizable interest-free loan to the government.  To do so, you need to ensure that you pay at least the lesser of the following two numbers during the course of the year:

• 100% of the taxes you owed for the previous year (110% if your Adjusted Gross Income was $150,000 or greater)
• 90% of the taxes you will owe for the current tax year

Note that the phrase, “taxes you owe,” in the above paragraph is not the amount you might pay with your tax return; it refers to the total amount of federal income tax paid throughout the year.

What’s the key takeaway?  Many people receive the majority of their income as employees and have it reported to them on Form W2.  Furthermore, most people’s income does not vary greatly from year to year.   If that description sounds like you, consider your last tax return.   If you received a sizable refund, consider lowering your withholding by increasing your allowances.

To do so, simply re-file Form W4 with your payroll department. You can do so anytime throughout the year and use TurboTax W-4 calculator to estimate your exemptions.    When you change your allowances in this way, your next year’s income tax refund will decrease or possibly be eliminated.  On the other hand, implementing this strategy means you will receive an increase in net pay right away.

To take it to the next level, use some of your new money to increase your IRA or 401(k) savings.  Doing so not only prepares you for your future retirement, but also lowers your taxes next April.

Tax season is here, and with it might come new questions about your taxes or financial situation. One of the most common misconceptions among members of the Hispanic community is that you need to pay someone to prepare your taxes in order to get your biggest refund.

This can be very costly in terms of time and money. You work hard for your money and deserve to keep every penny of it.  By filing your taxes online with TurboTax, you could save an average of $100 or more over going to a tax store.

For this reason, TurboTax gives you the opportunity to learn how to take control of your financial future during a free webinar this upcoming Tuesday, February 26. The session will be led by Mike Periu, a financial expert with more than 14 years of experience in the Hispanic community.

He will share tips on how you can start taking control of your finances, starting with filing your own taxes by the April 15 deadline. Mike will also answer live questions during the webinar.

This webinar will only be in Spanish. To access it, follow these steps:

1.     Go online next Tuesday, February 26  at 7:00 p.m. EST (6:00 p.m. CST / 4:00 p.m. PST)

2.     Click on the following Webex link:

https://turbotax.webex.com/turbotax/onstage/g.php?d=667940175&t=a

3.     Follow the instructions on the screen and enter your city, name and email.

4.     Depending on your computer settings, Webex might ask your permission to install free and safe software.

We know you work hard to earn your money, so don’t miss the opportunity to learn how to keep more of it by taking control of your financial future.

La temporada de impuestos ya está aquí, y con ella surgen preguntas acerca de tus impuestos o situación financiera.  Uno de los errores más comunes en la comunidad hispana es pensar que tienes que pagarle a alguien para preparar tus impuestos y poder recibir el rembolso más grande posible.

Esto puede salir muy caro en cuestión de tiempo y dinero. Trabajas duro por tu dinero y mereces quedarte con él.  Al preparar tus impuestos en línea con TurboTax, te podrías ahorrar un promedio de $100 dólares o más a comparación de lo que le pagarías en una oficina.

Por esta razón, TurboTax te da la oportunidad de aprender como tomar control de tu futuro financiero durante un taller gratuito por internet el próximo martes 26 de febrero.

El mismo será dirigido por Mike Periu, experto en finanzas con más 14 años de experiencia en la comunidad hispana. Él compartirá consejos de cómo puedes apoderarte de tus finanzas, empezando con declarar tus propios impuestos antes de la fecha límite del 15 de abril. Mike también contestará preguntas durante el taller.

Para acceder al seminario en español, sigue los siguientes pasos:

1.     Conéctate a internet el próximo martes 26 de febrero a las 7:00 p.m. EST (6:00 p.m. CST / 4:00 p.m. PST)

2.     Haz clic en el siguiente link de Webex:

https://turbotax.webex.com/turbotax/onstage/g.php?d=667940175&t=a

3.     Sigue las instrucciones en la pantalla e ingresar tu ciudad, nombre y dirección de correo electrónico.

 4.      Dependiendo de tu computadora, Webex te pedirá permiso para instalar un software gratuito y seguro.

Sabemos lo duro que trabajas para ganar tu dinero, así que no dejes pasar esta ocasión para aprender cómo quedarte con más de el al tomar las riendas de tu futuro financiero.

1.  Don’t Give Up on Last Year Yet

Even though it’s now 2013, there is still time to make some tax moves that will affect your 2012 taxes. One big move I would suggest if it’s available to you is to make a tax deductible contribution to a Traditional IRA. You have up until April 15th or the date you file your taxes to make a contribution for the previous tax year. This move would put more money in your retirement savings and it would be a big deduction from your income, likely lowering your taxes (or increasing your refund) by a nice amount. An IRA can be opened at a variety of places: discount online brokers, banks, mutual fund companies, etc.

2.  Getting a Tax Refund? File ASAP!

If you’re expecting a refund, make an effort to file your taxes as soon as you can. The sooner you get the money the sooner you can put it to work for you in a saving account, to pay down debt, or to spend on that vacation you’ve been wanting to take. Remember, this is your money, so don’t delay.

3.  Know Your Limits

Thinking about the year ahead I like to plan my savings goals for the year based on the published annual contribution limits set by the IRS on retirement, health, and education savings accounts. Each year these limits typically change, so you’ll want to adjust your automatic savings withdrawals to reflect the new yearly goal. For instance, in 2013, the contribution limit on Roth IRAs is going up to $5,500 for most individuals($6,500 if 50 or older). That’s about 458.33 a month for the next twelve months. Be sure to adjust your contributions to reflect this new year amount.

4.  Adjust Your W-4 Withholding

Another adjustment you should potentially make in the new year is to your employer withholding. Pick up a W-4 form and complete it based on your current situation. Big life changes like having a baby and getting married can have a big impact on your withholding, so be sure to keep your employer informed in the new year. The W-4 is your chance to tell your employer how to withhold for federal taxes.  TurboTax W-4 calculator can help you figure out how much you should withhold from your paycheck.

5.  Resolve to Keep Better Records

Finally, make this year the year when you keep better financial records. This will make your tax filing season much smoother. Keeping better track of your financial and tax situation could have a nice impact to your bottom line in the new year.

Off to college

But take heart – you’ve accomplished so much in the last eighteen years. You’ve raised a child from infancy to adulthood, prepared them for life, and are now sending them to college where they will continue to learn, grow, and become a successful part of society.

Congratulations! It’s time to celebrate. But it’s also a great time to examine your budget and find ways to lower your expenses while your children are off at college. The obvious advice is to downsize your house and vehicles. But here’s some more advice to really lower those monthly expenses.

Eating In / Eating Out

One of the best places for anyone to start finding ways to save money and lower their cost-of-living expenses is to examine and adjust how much they spend on food – eating at home and eating out.

The same is even more true for parents whose kids have left for college.

Make an effort to reduce the amount of food you buy to stock your shelves and fridge at home. Remember, that ‘bottomless pit’ you called your teenager isn’t around to empty the cupboard anymore. If you buy less food, you’ll end up saving money up front and you’ll end up throwing less out.

Not only does having your child away at college mean that there’s one less entree to order at your favorite restaurant, but that’s one less person having input on ‘what’s for dinner’. Many families these days eat out because their kids have grown accustomed to it.

Ask yourself if you really need to go out to eat tonight.

Insurance

Your child will need health insurance and, if they brought a vehicle to college, car insurance. The key phrase here is – comparison shop.

Sending your kids off to college is a great time to compare coverages of health insurance and car insurance, making sure that you’re getting the best price for you and your kids.

More than likely, your college student will stay on your health insurance while they remain a full-time student. But it wouldn’t hurt to check out any health coverage offered by the university.

And if your student isn’t taking a car to college, ask your insurance agent about a premium discount while they’re away from the steering wheel.

Lowering Your Taxes

Okay, so lowering your taxes isn’t exactly an active, everyday way to decrease your expenses. But, finding the best tools to get your taxes as low as possible can save you some big bucks each April.

First, you need to decide which will be more valuable – claiming your student as a dependent on your tax return or allowing them to file their own return. For example, your student may want to file on their own if they are expecting a few hundred dollars from the IRS. But as parents, you might be able to save a few thousand by claiming your child as a dependent.

Whatever strategy you choose, make sure you examine all of the available college tax credits and deductions that are made available to those seeking higher education.

Cable, Internet, and Entertainment

Do you watch as much television as your kids? Do you download as much music or as many movies from the internet? Are you playing online video games like your teenager?

If the answer is no, check out reducing the speed of your internet (internet providers love hiking up the price on faster connections), think about scaling back your cable or satellite TV channel lineup, and stop paying for online gaming while your kids are supposed to be earning a degree (yes parents, you don’t just buy a video game anymore, now they come with monthly costs too).

Saying ‘No’ to Adult Children

Let’s face it, most parents will always want to help out their children, no matter what their age or predicament. But there’s a fine line between helping your grown children and inviting them back into your home to continue raising them into their mid-to-late 20s or even 30s.

One of the best ways to reduce (or guard against potentially increasing) your expenses is to help your children understand that you’ll always be there for them, but that you expect them to begin living their lives as responsible, independent adults.

Tax Tips for Newlyweds

Have a Financial Game Plan Ready

Before you two start tinkering on your finances, having an overall plan for your money and your goals can be incredibly helpful and empowering.

• Do you want to eventually own a house?
• Do either one of you want to start a business?
• Do you want to have children?
• What are your goals for work and retirement?

Get Your Withholding Squared Away

Once you’re married, you may want to update your withholdings. If you’re an employee, you should check out changing your W-4 with Human Resources. Going back to your goals that you’ve discussed, you may want to adjust your withholdings so you get more per paycheck throughout the year.

Perhaps you two may want to get a big tax refund so you can use that lump sum for a big financial goal. Each has its pros and cons, so the two of you have to decide what is the best match for you.

If you do expect a refund or you’re getting a slight increase in your paychecks after the adjustments, here are some suggestions on how you two can use the money:

• Build savings. Having a financial cushion in case of emergencies, a house down payment, or for starting a business can be a smart move.
• Pay down or knock out debt. Starting off your marriage with less debt can be a great financial win. Even if you can’t completely pay off the debt, paying down a bit can save you on interest charges.
• Boost your IRA. If you haven’t created one already, you can use the money to boost your retirement accounts.

Make Taxes Easier Next Year

Even though it’s a bit before you have to file your income taxes, it doesn’t hurt to get prepared now. It’ll make it easier for the two you and it could speed up process (and a refund) if done now.

When you file your taxes your name should match what the Social Security Administration has on record. If they don’t match, you’ll have problems with getting your taxes processed.

Just fill out a Form SS-5 (the application for a Social Security Card) and submit it either in person at the local U.S. Social Security office or U.S. Embassy. You must also submit proof of the name change, so have a certified copy of your marriage license. You can also mail it to the office along with the required documentation.

With just a little effort now you two can make filing taxes less stressful.

Thoughts on Taxes and Marriage

How many of you recently married? How are you two merging your finances? How’s the process going for you?

Natural Disaster

Here are helpful tips to help you safeguard your records:

Create an Electronic Backup Set of Records

• You should keep an extra set of electronic backup records in a safe place away from your original set.
• One advantage of preparing your own taxes with tax software is you can have control over saving your own copies of tax files.  Always save your tax return as a PDF file and back it up on a flash drive or CD.
• I always suggest that you email yourself a copy of your PDF file(s) so even if your computer is inaccessible, you can access your emailed PDF file from any computer.
• Banks and financial institutions can provide electronic copies of important documents.  Don’t forget you can access that information online.

Order Transcripts or Copies From the IRS

• If you still can’t access your tax records you can request backup copies of previously filed tax returns and all attachments by filing Form 4506.
• You can also request transcripts by filing Form 4506-T.  Transcripts show most line items including your adjusted gross income.  Transcripts can also be ordered online or by calling (800)908-9946.
• Special tax law provisions may help taxpayers and businesses recover financially from the impact of disaster especially when the federal government declares their location to be a major disaster area.  Click on IRS’ s Disaster Assistance and Emergency Relief for Individuals and Businesses for more information.
• If you are affected by disaster, you can also call (866)562-5227 to speak to a specialist trained to handle disaster related issues.
• For additional information regarding assistance in the event of a disaster, check the IRS Disaster Losses Kit for Individuals.

Document Valuables

• Always photograph or videotape contents of your home to help prove market value of items for insurance and casualty loss claims.
• Store photographs and videos outside your home.
• Snap pictures of valuables on your cell phone and email the pictures to yourself or a trusted friend or relative so you can access them from any computer.

Following these tips will give you less to worry about in the event of a disaster.  What plans have you made to safeguard your important documents?  Do you have any special tips to share?

Income

The value of personal exemptions increases to $3,800 per person and the standard deduction also rises to $5,950 for singles and $11,900 for married couples filing joint returns. Just over 2/3 of taxpayers take the standard deduction, so these year over year increases, however slight, are still important. The tax brackets (10%,15%,25%, 28%, 33%, 35%) remain unchanged, but the transition from one to the next shifts up slightly. For example, the single earner will see the 25% rate start at a taxable $35,350 in 2012 versus $34,500 in 2011. A bit of savings due to inflation adjusted brackets.

Inflation adjustment

The “Kiddie Tax” remains unchanged. A child with unearned income of up to $1900 may be able to take a $950 standard deduction and they will be taxed at the 10% tax rate. Income beyond that may be taxed at the parents’ rate.

Retirement Savings

Contribution limits rose for 401(k), 403(b), and 457 plans as well as the Thrift Savings Plan. The new limit in 2012 is $17,000 plus an extra $5,500 if you are 50 or older by the end of the year. The IRA limit remains at $5,000 or $6,000 if 50 or older.

Deductions

The HSA (Health Savings Account) contribution limit has increased to $3,100 for individuals and $6,250 for families. An additional $1,000 is available for those 55 and older.

There are no changes this year to the Dependent Care Account.  There is a $5,000 limit for money you and your spouse can withhold pre-tax to pay child care expenses for your child under age 13.

Flexible Spending Accounts will also see no change in 2012. This is pretax money you have withheld in order to pay for medical needs, including co-pays or prescriptions not covered by your plan. There is currently no limit, although most employers have a $5000 maximum permitted. If you have been debating about getting any elective medical procedures you may want to make the most of your flexible spending account in 2012 since the rules will change in 2013 and the maximum you will be able to contribute to an FSA will be limited to $2,500 per year.

Credits

In 2012 the Adoption Tax Credit decreases to $12,650. Also note, in 2011, it was refundable, meaning you’d get it if you qualified, regardless of your total tax bill. In 2012, the tax credit can not create a negative tax bill, it can only offset your taxes due for the year.

Child Tax Credit – In 2012 you can still take advantage of this tax credit and reduce your tax liability by up to $1,000 for each qualifying child under 17.  The Child Tax Credit is scheduled to expire at the end of 2012.  If the same tax credit is not extended after 2012, the Child Tax Credit may decrease to $500 in 2013.

Earned Income Tax Credit – This tax credit increased to a maximum $5,891 in 2012, up $140 from last year. The maximum income to receive any of this credit is $50,270, and the credit itself is based on both income and number of dependents in your family. Note – Your investment income must be under $3,200 to qualify for this credit so plan accordingly.

The Saver’s Credit – This is a credit up to $2000 for couples and $1000 if you’re single. To qualify, a couple may have an income of up to $28,750 for a single filer, and $57,500 for married filing jointly. This credit is based on both income and your deposit to a retirement account. It’s also impacted by other deductions and credits, so it’s best to let TurboTax show you what credit, if any you’re eligible for.

Estate Tax

The estate tax top rate will stay at 35%, with the exemption rising to $5,120,000 until the end of 2012.

Five Simple Saving Strategies Part 1

Here are the first five of ten easy strategies to increase your savings level without becoming cheap.

Saving Strategies

Strategy 1:  Don’t become emotionally separated from your money.

Remember when a grandparent or special aunt gave you a dollar bill?  As a child, you enjoyed simply having the money, looking at it, and even counting it.  You knew exactly how much you had and you planned exactly how you were going to use it.

How things have changed!  Now your paycheck is direct-deposited and you charge most every expense. You don’t have a clue how much money you have in your wallet until you find yourself at a place that doesn’t accept credit cards.

This emotional separation from your money makes it much easier for you to spend more.  Try using cash instead of credit cards for a while.  Keep track for a couple of months and see if your expenses decrease.  Handing over six hard-earned twenties is far more difficult than charging $119.40 on a credit card.

Strategy 2:  Understand and be honest about expense classifications.

Think of discretionary expenses as “wants” and nondiscretionary expenses as “needs.”  But be careful.  Frequently, people categorize wants as needs. Incorrectly labeling your expenses limits your ability to take advantage of additional savings opportunities.

Think about decisions you make every day. Are the bulk of your purchases legitimately needs, or do you just view them that way? Eating is a need. Eating out is a want.

Strategy 3:  The time to lower your “needs” spending was yesterday.

Despite successful efforts to limit discretionary spending, many people still struggle with saving.  Typically, this is because their nondiscretionary expenses are just too high for their income level.  The best way to handle this is to avoid the situation in the first place.

It is you who must care enough to review your spending priorities before you make a commitment to an apartment lease, mortgage, or car. Just because someone will sell you something doesn’t mean you can actually afford it. You determine your nondiscretionary expenses when you sign your name. Keep that point in mind next time.  Knowing that additional nondiscretionary expenses could take a significant part of your monthly income for a year or longer just might motivate you to not choose the one with “all the extras” for “just a few more bucks a month.”

Strategy 4:  Enjoy free stuff.

Depending on your interest, you can go on a long hike, sit in a park, talk with a friend, read a book or newspaper, lie on the beach, or play sports with friends without spending a dime.  Many people think they can’t have a good time unless they spend a fair amount of money.  But that belief is based on what has been successful for them in their recent past, not on reality.  When you were younger, there were hundreds of days in which you had no money to spend, yet you were as busy and as happy as ever.  Can you try just a day or two like that this month?

Strategy 5:  Major on the major.

Don’t spend much time evaluating minor expenses, such as where to buy pizza. Rather, put major focus on major purchases.  A car and a place to live are obviously major expenses.  What else is major?  Regardless of your age, financial aptitude, or income, a good rule of thumb is to treat anything you can’t pay for entirely when you buy it as major.  Spend serious time evaluating those purchases to ensure you can afford what you are buying, and you value every feature you’ll be paying for over the upcoming months and years.

Check back for part two of simple savings strategies soon.

W-4 Form

There’s some good news if you’re employed and have taxes taken out of your paycheck automatically. When your income changes in this situation, the taxes taken out will change accordingly. But that doesn’t mean you don’t have anything to worry about. You may still be in a situation where you’re having too much or too little withheld, so now is a good time to check your W-4.

You file form W-4 with your employer and this tells them how many exemptions you want to claim so they can calculate how much should be withheld from your paycheck and sent to the IRS. What you enter on this form will largely determine how much of a refund or how much you owe each April, and most people tend to have more money than necessary withheld, resulting in a tax refund.

You can use the TurboTax W-4 salary calculator.  It will only take a few minutes of your time and it will help you come up with the appropriate number of exemptions so that you can maximize your paycheck without letting the IRS hold on to more of your money throughout the year. While there’s nothing wrong with getting a refund every year, it’s still a good idea to put more money into your pocket every month, which can then be immediately applied to one of your many financial goals without needing to wait for that one refund check each year.

For the Self-Employed

If you’re self-employed and expecting a change in income, you’ve got a little more work to do. Since your taxes probably aren’t automatically withheld from a paycheck, you’re likely relying on paying quarterly estimated taxes. When your income changes, so too does the amount of money you need to send in each quarter. In the event your income goes up and your estimated payments don’t increase to reflect that, it’s possible you could be hit with an underpayment penalty.

While it isn’t an exact science, figuring out how to adjust your quarterly tax payments doesn’t have to be complicated. The easiest thing to do is to simply adjust the tax payments by the same percentage as the change in income. For example, if you’re expecting a 20 percent increase in income, increase your quarterly tax payment by an additional 20 percent. You also need to consider your other tax deductions and credits, but TaxCaster can easily help you estimate if you are taking out enough taxes.

There are obviously many other business items and expenses that can change how much tax is to be paid, but if at first you simply increase or decrease your tax payments in-step with the change in income you’ll be in the ballpark. Once you file your taxes at the end of the year you’ll then have a better idea of what those tax payments need to be going forward and you can fine tune it for the next tax year.

Military Family

Though freedom is always being tested, the faith of our fathers endures, thanks to our military personnel. Whatever George Washington said to his freezing, starving troops at Valley Forge convinced them to fight on. Today Washington’s statue looks down on Wall Street, and he is probably still saying, “Hang in there! We are still a country of economic strength, opportunity, and security.”

This Independence Day we are paying a whole lot more than our forefathers could ever have imagined, for everything from the hot dogs, to the watermelon, to the gas for the family car. Our troops perform an invaluable service, but their pay is modest. Fortunately there are many military discounts that they can claim. Here are just a few of the savings that are available if you have a military ID card:

Many movies, concerts, zoos, sporting events, theme parks and museums offer military discounts with a military ID card, so don’t pay full price before you visit the Information Office.

Hotels and car rentals offer discounts too, so when making reservations, always ask the hotel representative if they offer military discounts or government rates for federal employees. Some may also offer additional savings for those military personnel being deployed or returning from deployment.

Check out military tuition scholarships at your local colleges and universities. Many of them offer military tuition scholarships that discount the credit hour cost for its courses to the same amount that is reimbursed through the Military Tuition Assistance Program. That amounts to free education for undergrads with a military record.

Even the post office has gotten on the bandwagon. Priority mail sent to an FPO or APO address is eligible for a substantial discount.

Retail stores off  base also offer military discounts. National retail chains like Home Depot, Lowe’s, McDonald’s, Kmart, Walgreen’s, and Apple offer various discounts to military personnel and their families when a Military ID is shown.

And of course, military exchanges and commissaries offer a variety of goods at discounted prices.  According to MilitaryMoney.com, single service members save an average of $1,000 each year, while a family of four saves at least $3,000 just by shopping at the commissary.

The road ahead is truly what we make it. And that’s exactly what the Founding Fathers had in mind—a chance for all of us to create the future we dream of for ourselves and our families. Being grateful for what we have will help us move forward with confidence and hope.

Have a hopeful and faithful Fourth!

Record Keeping

According to the IRS, you must keep the records needed to substantiate all your income and deductions available for inspection. You don’t have to spread them out on the coffee table in case someone from the IRS knocks your door.  But upon reasonable notice from the IRS, you must be able to produce the records for an audit.

Except in the case of fraud, the IRS must audit your return within three years from the due date of the return or the date of filing, whichever is later. That statute is extended by three years if you misstated your income by 25% or more, and indefinitely if you file a fraudulent return, or no return at all.

Even if you filed your tax return on time and reported all your income, you should retain the following records for a longer period of time even though the statute of limitations has expired:

Prior Tax Returns – Keep copies of all tax returns you have filed in the past. These returns are helpful in preparing future tax returns, and they provide an interesting road map of your financial history that may be of interest to you down the road.

Payment of Taxes – Keep canceled checks that prove that you paid your taxes when due. The IRS records are not always what they should be, and sometimes they misplace your payment.

Basis of Property – Records relating to the cost of property and improvements to that property should be retained as long as you own that property or a replacement property. If you sold your residence, but deferred the tax on the gain by reinvesting in a new house under the old rules in effect before 1998, you will need to retain the records for both the new house and the old house.

How Should You Keep Your Tax Records

You should always keep a set of backup records safely away from the original set.  To ease your pain, keep in mind that financial institutions provide documents and statements electronically via the internet and these documents can be downloaded to backup storage devices or burned to a CD.

One of the benefits of using TurboTax is your tax information is safely and securely stored so you can access it and transfer it to the next tax year.  Although your tax information is saved when you complete your tax return, it is best to also save your tax return as a PDF file.  This step can save you valuable time if you need to access information such as your adjusted gross income or if a copy is required to obtain a loan.  In addition, if you use TurboTax Free edition, you need to save a PDF file.

TurboTax apps for your mobile or tablet device also will store your tax return, however you should back up your completed tax files for your records before deleting the apps.

Of course, if you want to keep all your records forever, there’s no rule against it if you have the room. We know many people who like to pore over old records, and seem to derive as much enjoyment from it as some of us do looking at old photographs.

But when the neighbors complain that your burgeoning collection of bank statements, checks and receipts are blowing out your windows and flying around the neighborhood, it’s time for some spring cleaning.

Taxes for Beginners

A New Job and Your W4

If you’re a beginner at filing your own taxes, chances are high that you’ve started a new job, possibly your first in the “real world”. Congrats! But with adulthood and a full-time job comes the reality that a significant part of your pay won’t get to see the inside of your bank.

When you start a new job, your employer will have you fill out a W4, which is the Employee’s Withholding Allowance Certificate. This document basically wants to know your marital status and how many tax-withholding allowances you intend to claim.

Filling out your W4 correctly will go a long way in easing the pain of your first tax season.

A Large Refund Isn’t Always a Good Thing

Yes, a giant chunk of money is great. Who wouldn’t love the massive refund check, like the one’s you hear about on commercials this time of year? But if you receive large tax refunds year after year, you might want to rethink your money management.

Basically, a tax refund means that you paid the government too much money over the course of the last year. It’s like giving Uncle Sam an interest-free loan. So when you get your refund, the government is giving you back your money. If you make the right adjustments on your W4 in the previous year, you could keep more of your own money and put it to work for you throughout the year.

Filing the Easy 1040EZ Form

If you’re just starting out in life, it’s a good bet that you will qualify for the IRS 1040EZ Form. The major criteria for this form are that you haven’t made any money from investments, you make $100,00 or less per year, you don’t claim any dependents, and you didn’t earn more than $1,500 in interest.

Not only is this form simple to fill out, but if you qualify by meeting the required criteria, the 1040EZ is free at TurboTax.com and TurboTax will easily guide you through you entries. Sure, you could spend $70 by using a tax professional to file your taxes. But if you qualify for the 1040EZ form, your situation probably isn’t complicated enough to justify the money spent.

Standard Deduction vs. Itemized Deduction

As a beginner to filing taxes, it’s important to understand the difference between the standard tax deduction and itemizing your deductions. Any deduction will reduce your amount of taxable income, but choosing the right path will save you the most money.

The standard deduction is just what it sounds like – it’s standard. It’s a set amount of money and just about everyone will qualify for it. For the 2011 tax year, the standard deduction amount for a single person is $5,800, married filing jointly is $11,600, and married filing separately is $5,800 each. You’ll want to use the standard deduction if your itemized expenses do not exceed these amounts.

Itemized deductions are expenses made on certain goods and services (such as medical expenses, mortgage interest paid, giving to charity, and job-related costs) that the government has declared as tax deductible. If all of your qualified itemized expenses add up to an amount greater than the standard deduction amount, then you should use the itemized deduction because that will reduce your taxable income by a greater amount.

One of the easiest ways to find out which deduction you should take is by using your tax software. Most tax software, including TurboTax, will walk you through all of your potential itemized deductions, calculate the totals, and show you which deduction will benefit you the most.

Don’t Wait Until the Last Minute

The final piece of advice to give a tax newbie is to make certain that you file on time. Don’t worry about an extension, don’t wait until the last minute, and don’t let tax fear and intimidation force you to ignore the inevitable. Taxes are due on April 17th this year.

Forget about your history of procrastination, your late night college cram sessions the night before finals, and your constant inability to be on time. Today is a new day! It’s time to plan ahead, prepare in advance, gather all of your tax information as soon as it’s available, and knock this tax stuff out of the park.

Good luck and happy tax season.

New Year Tax Tips

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.

Capital Gains Tax

A capital gain is the profit made when you sell an investment for more than what you bought it for. If your investments sell for less than you bought them for, then you
are entitled to claim a capital loss. If you have incurred capital gains this year, and you have some losing investments in your portfolio, consider harvesting some of those losses to offset the gains so you won’t owe taxes on the capital gain income. Here’s where to start:

Compute the gains on assets you’ve already sold.  Make a list of your sales of stocks, bonds and real estate during the year, and add expected capital gain dividends on mutual funds.

Offset any losses you have already realized this year. That includes the stock you purchased when it was high and you thought it would go higher, but you finally sold when it dropped well below what you paid for it. Don’t forget loss carryovers from prior years – you can spot carryovers on page 2 of last year’s Schedule D of your personal income tax return.

If the gains exceed the losses, look for unrealized losses to offset those gains.  You may be holding onto a stock that has dropped, hoping it will regain its value. This may be a good time to sell the stock and put that loss to work.

Check your income tax bracket.  Before taking the step to sell a stock that has dropped in value, also see if you can take advantage of lower capital gains rates, which were extended until the end of 2012.  The maximum capital gains rate for most people with long-term capital gains is 15%.  If you have income lower than $34,500 ($69,000 for married filing jointly), capital gains and dividends may be taxed at 0% depending on the type of net capital gain!

Beware of the wash sale rule.  You cannot deduct losses from sales in a wash sale.  A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale, you buy substantially identical stock, acquire identical stock or securities in a fully taxable trade, acquire an option to buy substantially identical stock, or acquire substantially identical stock for your IRA.

Tip:  If you have a disallowed loss from a wash sale, add the disallowed loss to the cost of the new stock or securities.  The result will increase the cost basis of your new stock and decrease your gain on the sale of the new stock.

Don’t harvest too many losses.  Once you have offset your losses against your gains, excess losses can reduce up to $3,000 of ordinary income from employment or other sources. If your losses are greater than that, the excess can be carried over to the next year.

TurboTax easily guides you through the necessary interview questions and accurately makes the behind the scene calculations for your capital transactions.  You can also use tax calculators to help you plan and work through various tax scenarios.

Boost your retirement accounts

While you have until April 17^th to make contributions to your IRA, you only have until the end of the year to boost contributions to your employer-sponsored plan, such as your 401(k) or 403(b) plans. The benefits are twofold: pre-tax contributions to these accounts not only reduce your overall tax bill, but also build up your savings. With just a few more pay periods to go, try to max out – ideally, stashing away a total of $16,500, or $22,000 if you are 50 or older.

Review Investments

It’s been a wild ride on Wall Street this year, so carefully review your portfolio statements to assess your investments’ overall performance. After all, recognizing capital gains and losses before ringing in the New Year, helps minimize your net capital gains tax and maximizes deductible capital losses. Any investments you want to sell? Consider doing it before the end of the year. You can deduct up to $3,000 of losses against ordinary income.

Improve your home

If you haven’t already maxed out your home energy tax credits in previous years, make 2011 the year to do it since the Residential Energy Tax Credit expires at the end of the year!  The tax credit is worth 10% of the cost up to $500 for insulation, roofs, skylights, and doors, up to $200 for new windows, and up to $300 for heating and air conditioning systems. Upgrades must be installed by Dec. 31^st in order to claim the tax credit. For more specifics, including various restrictions and other details, go to http://www.energystar.gov.

Defer income (until 2012); accelerate deductions (into 2011)

Are you owed any self-employment income? A bonus, perhaps?  It may be worth checking whether payments can be delayed until the start of next year.

This strategy not only minimizes taxable income for 2011 (something to think about, particularly if you anticipate being in a lower tax bracket in 2012), but it may also enable you to claim larger tax deductions, credits, and other tax breaks for 2011 that are phased out over various levels of AGI. Specifically, things like child tax credits, higher education tax credits, and the above-the-line deduction for higher education expenses and the tax deduction for student loan interest meet these requirements.

Pay Bills Early

Prepaying some of your bills can also save you money. For example, if you pay your January mortgage in December, you can deduct the January interest payment this year. This gives you 13 months’ worth of tax deductible interest in 2011, thus boosting this year’s total tax savings.

Give the gift of cash

We currently have very generous estate and gift tax exclusions.  The gift tax exclusion allows you to give gifts valued up to $13,000 per person per year($26,000 per husband-wife team) to any number of recipients without being taxable.  Estate tax applies to the taxable estate at death.  An estate tax return may need to be filed, however if the gross estate less allowable deductions is less than $5 million, the decedent is not required to file an estate tax return.  While the $5 million lifetime exclusion (which expires at the end of 2012) may only be relevant for the wealthiest Americans, the annual $13,000 gift exclusion disappears forever if you fail to use it by the end of each year. In most cases, the gift isn’t complete until the recipient of a check cashes or deposits it.

Be charitable

Donations to qualified charities, whether made via cash, check, or other monetary gift, need to be substantiated with the proper documentation, as do miscellaneous clothing and household gifts. Donations can add up to hundreds of dollars in tax deductions; to determine your item’s fair market value, use the free online tool “ItsDeductible.” Also, just a reminder: you have to itemize your tax deductions in order to get the break.

There are a number of tax benefits scheduled to expire this year, and many require that you take action soon if you want to see a higher refund or a lower tax bill next year. There is always a chance — in fact, I can guarantee — that Congress will make more changes to tax laws before it’s time to file in April 2011. For now, consider taking advantage of some of the credits and deductions that may not be around next year.

Homebuyer Tax Credit

One of the most popular benefits is the updated Homebuyer Tax Credit. If this is your first time buying a home, the government wants to give you up to $8,000. If you’ve lived in your current home for a long time but move to a new house, you could receive up to $6,500.

Unless extended by Congress, you must buy a qualifying house by the end of June this year. There are other restrictions as well, including income limitations. Make sure you’re familiar with all the rules before expecting the credit. Experts aren’t expecting this credit, already extended once, to be extended again. Time is running out, but the decision to buy a house should not be based solely on the existence of a tax credit.

Adoption Credit

Just a few weeks ago, Congress extended tax credits for adoption expenses to 2011, so there is now an extra year for taxpayers to receive some of the expanded benefits that have been put in place recently. Parents who adopt a child can receive a credit of up to $13,170 to help cover expenses spent during the adoption process.

American Opportunity Tax Credit

One new tax law of the 2009 economic stimulus was a new credit to help pay for college expenses such as tuition. The Hope Credit was expanded into the new American Opportunity Tax Credit, increasing the benefit students and parents can receive on their 2009 and 2010 taxes.

For any of the first four years of higher education, students or their parents (if the student is a dependent) can claim $2,500 in 2009 and 2010 to offset the costs. Up to $1,000 of this credit each year is refundable, which means you will receive the credit even if you have no other tax liability. This is a benefit for students who may not have much other income.

Unless Congress changes the rules again, the American Opportunity Tax Credit will expire at the end of the year. It will be superseded by the older Hope Credit, which provides a smaller benefit.

Making Work Pay Credit

Most people are receiving the Making Work Pay Credit without even knowing it. Rather than receiving this credit as part of your annual tax refund, most people have been receiving a small amount extra in their paychecks since April 2009 and will continue receiving this extra amount through the end of the year.

If you do not have regular tax withholding through your job or if you elected not to receive this extra money in your paycheck, you were able to claim the Making Work Pay Credit on your taxes and will be able to again in 2010. This is another tax rule enacted by the 2009 economic stimulus, and it will expire at the end of this year.

Low capital gains tax rates

Since 2008, investors have benefited from low tax rates on investments. For example, taxpayers in the 15% bracket can sell stocks with long-term capital gains without owing any taxes. In 2011, this tax will return to a rate of 10%. At all income levels, taxes on investments will increase. Currently, the dividends from some investments are taxed at these lower rates, but in 2011, dividends will be taxed at the same rates as ordinary income.

Stay tuned for more updates

The tax system is designed to be adjusted when necessary to react with current economic issues. Keep checking the TurboTax Blog for the latest updates when tax laws change, affecting taxpayers and their wallets.