Many taxpayers have already filed their tax returns and have paid their taxes owed or are awaiting a refund. Planning for 2014 can start now. Now is the best time to deal with these issues while the 2013 tax experience is still fresh on your mind and there is time left in the year for small adjustments to make major differences.
Below is a list of six things you can do now that will make 2014 better organized and less stressful.
First adjust your withholding. It is great to be getting a big check back from the government, but if this happens to you every year then you are paying too much taxes. Millions of American workers withhold more taxes from their pay than what is required. Give yourself a pay increase by adjusting your withholding. Instead of giving the federal government a no interest loan put that money saved in savings to prepare for retirement, college, or use it to fully fund your emergency plan. If you owed tax when you filed, you might need to increase the federal income tax withheld from your wages. Discuss your withholdings with your tax professional or go to IRS.gov and use the IRS Withholding Calculator to complete a new Form W-4, Employee’s Withholding Allowance Certificate.
Keep your 2013 return. Store your tax return and supporting documents in a safe place. You could need to refer to your return in the future, and you’ll want to know where to find it. An IRS audit is always a possibility and you may need a copy of your return when applying for a home loan or financial aid. The 2013 return can also be used as a helpful guide for next year’s return.
Get your records organized. Did you have a record of each charitable contribution you received in 2013? What about your medical expenses? Or business expenses? Too many of us pick up a receipt that could be a potential tax deduction or liability and we toss it down in a drawer, purse, or glove box. Establish one location where everyone in your household can put tax-related records during the year. You might also want to write down the transaction in some sort of ledger. Receipts tend to fade over time and memories fail. Many people now store all their receipts and records in a safe place online. That way your records are available even if your physical records are stolen, are misplaced, or the house burns down. Having all the records available will avoid the stress of scramble for misplaced mileage logs or charity receipts come tax time.
Now is a good time to shop for a tax professional. If you did your taxes yourself, did you do a good job? Could your time have been used more productively by hiring a professional. If you use a tax professional to help you with tax planning, were they knowledgable? Do you have doubts about their competence? Will they still be in this business next year or are they a part-time preparer who just work a few weeks a year. Now would be a good time to interview tax preparers for next year. You may have met the filing deadline, but if you have doubts about your 2013 or 2012 returns this would be a good time to get a second opinion review. There is a possibility that you could get a bigger refund. You also could identify potential problems. Ultimately the IRS is going to hold you responsible for your return regardless of who prepares it .
Many people claim the standard deductions because they did not have their records in order or because it is just easier. Consider itemizing deductions. There might be a possibility to reduce your taxes by ‘bundling’ your deductions. For example, you could pay your January mortgage payment in December or get those property taxes paid in before Jan 1 to increase your deductions. Were your charitable contributions last year a little “wimpy”? Some people like to use a percentage (often 10%) as a goal for their giving. Did you meet your giving goal in 2013? Now is the time to increase your giving to increase your tax savings. This would also be a good time to fully fund your IRA, begin a tax deferred college savings plan, or increase your contribution to your 401k. Having a planned approach to your saving, spending, and giving works best for you and can pay off at tax time next year. To see the list of potential deductions see Schedule A, Itemized Deductions at IRS.gov. Talk to your tax professional about how to increase your deductions.
Finally be prepared for changes. Congress dramatically increased taxes on most Americans with the fiscal cliff deal and there will be more changes. For a tax kit to help you become better organized or a second opinion review, call Trustway at 205-451-1945 or visit http://adefiniteplan.com.