Happy Forget-Me-Not Day – What Not to Forget to do Before Tax Season

Tax Planning Young African Businessman Working on Laptop at the Office

National Forget-Me-Not Day is a day to reconnect with friends and family that you might not see regularly. Take a minute that day to let someone know that you are thinking about them with an email, phone call or letter.

It’s also a good day to begin thinking about dear old Uncle Sam. After all, tax season is right around the corner, so though you and Uncle Sam may not have had much contact lately, you are soon going to be in intimate contact with him again. Here are some things you should remember to do before tax season begins early next year.

  1. Round up your tax documents. If you spent last spring digging through papers to find tax documents you needed to prepare your tax return, this year vow to have everything in one place. Here’s a simple way to make that happen. Label a file Current Tax Info, and tuck it into your desk drawer. Then go through your papers, and drop everything that’s tax-deductible into the file. It will be a breeze to organize that file once you’ve got everything you need all in one place.  Also make sure you have your previous years tax return available.  New laws require you to enter your previous years’ adjusted gross income before you e-file instead of an AGI pin.
  2. Find tax deductions in your closet. As you put away the summer clothes, make a pile of things that you never wear and things that are outdated or no longer fit. Bundle them all up and take them to your local charity collection point. That way someone else will enjoy them and you’ll get a big tax deduction for 2016.  You can easily track and value your donated items using TurboTax ItsDeductible which transfers the information directly to your tax return making tax time even easier.
  3. Max out your retirement plan. Most employers let you increase your contributions to your retirement toward the end of the year to maximize your contributions. You can contribute up to $18,000 to your 401(k) for 2016, plus another $6,000 if you are 50 or older. For IRAs, you can contribute up to $5,500, plus an additional $1000 if you are 50 or over.  If you are self-employed you can contribute to an SEP IRA and save on your taxes. You can contribute up to 25% of income or $53,000, whichever is less.  In addition, your contributions are tax-deductible for your business.
  4. Spend down your flexible spending account. Flexible spending accounts allow you to set aside a portion of your salary before taxes for certain purposes, such as child care or health care expenses. But some work on a “use it or lose it” basis, so spend all the money in the plan by the end of year, unless your employer provided plan allows you to extend that deadline.
  5. Consider converting your IRA to a Roth. If your modified adjusted gross income is less than $100,000, you can convert your IRA to a Roth. You will have to pay tax on the amount converted, but all future growth will be totally tax-free.
  6. Report changes in income for Marketplace insurance.  You still have a little time. If you have Marketplace insurance and had changes in your income for 2016 or additions to your family be sure to report them to the Health Insurance Marketplace you may be able to get a bigger premium tax credit when you file your taxes or avoid paying any back.
  7. Figure your taxes now. If you are not sure whether you had enough withheld from your paycheck or if you are self-employed, that you paid enough estimated taxes you can use TurboTax TaxCaster to get an estimate of your taxes.   Hopefully you are all good and paid in enough taxes.  If you didn’t, you can avoid penalties by increasing the withholding on your last few paychecks or send in your estimated tax payment if you are self-employed by the end of the year to make up the difference.

Don’t worry about knowing the tax laws when you sit down and file.  TurboTax will ask you simple questions about you and give you the tax deductions and credits you are eligible for based on your answers.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s