It’s that time of year again. For some of us, it means a few extra bucks in our pockets thanks to our income tax refund. For others, it means a few extra bucks out of our pockets to pay Uncle Sam. But for most of us, it means preparing and filing our 2014 tax return in some way shape or for. I love reading these number tips/idea articles on almost any topic. So I figured L&A should do a general tax tips article for tax season 2014.
1. Create a Tax File
Set up a file, whether it be digital or paper. It always helps to be organized when it comes to getting your taxes done. Read the post below on Evernote and organize your tax documents if you have any interest in saving some trees and going paperless. But even if you don’t decide to go the Evernote route, set up a paper file of all relevant tax forms. These documents include, but are not limited to, W2’s, K-1’s, 1099’s, Receipts for Property Taxes, Mortgage Interest Statements from the bank etc. For a more detailed look at relevant forms, head over to LavinAndAssociates.com/required-forms. In this file, make notes of general questions and concerns so they are ready and waiting for the consultation with your tax professional.
2. Keep Receipts
We know, we know. What a pain in the neck. But receipts are really a great insurance policy should you ever run into a jam with the IRS or any other state or local agency. The ability to prove certain tax deductions is vital in making a case against any audits or common tax problems. Now in modern times, some companies have the capability to email receipts which saves the aggravation of a disorganized mess of long thin sheets of paper. Keep the receipts organized as well. For example, if you have receipts for an energy saving door you installed on your house, along with receipts for energy saving windows, keep them paper clipped together. Or scan the receipts into Evernote and tag them with Energy Credit as mentioned in the article below.
3. Fund a Retirement Plan and Maximize it
Many clients do take advantage of this tip. Some clients do not. I’m only making a salary of $40,000 a year how do I save any money let alone fund a retirement plan? Most people can find money spent in their monthly budget that could have otherwise been saved. That daily trip to Starbucks can save you 200 bucks a month. Opening some retirement plans, an IRA or 401-k, can decrease your tax liability by decreasing your Adjusted Gross Income. So if you make $100,000 a year and contribute 15,000 to your retirement plan, you would only be taxed on $85,000 dollars. It’s pretty easy to see how this may save you some money as far as money owed for taxes. Also, put as much money towards a retirement plan as you can. In other words, maximize your contribution to your retirement plan. L&A can also help you decide, should you choose to go the route of opening a retirement account, which plan may be best for your particular circumstances.
4. Stay Current with Tax Legislation
I know what you are thinking. Isn’t that what I hired Lavin & Associates for? The laws change so quickly and so often that it’s difficult to keep up. We know about tax law changes when they happen and we would rather save you the disappointment of counting on a deduction or credit that was recently thrown out and abolished by Congress. It is also beneficial to be informed because many Americans do not take advantage of credits or deductions they are entitled to. Ultimately, these credits and deductions reduce your tax liability.
5. Have Good Timing
Make that mortgage payment on December 31st. Pay your property taxes on December 31st. Have some health related treatment or procedure in the last quarter of the year. Small business owners or the self employed can pay your fourth quarter state estimated taxes in December. These are some options that can increase itemizing potential and ultimately reduce your tax liability.
These are the Lavin & Associates tax tips for 2014. We hope that you will take advantage of some of these suggestions because they can lead to better results on your tax return. Expect many more tax related help tips in the coming months