|
The tax adviser's top 10 tax tips
By George
Saenz Bankrate.com
Taxes are generally one of your biggest expenses.
Here are some important reminders to help you gain control over
your them and save.
1. Organize your bank,
credit card statements.
2. Save your important tax documents.
3. Fund pension and IRA accounts.
4. Look at your business structure.
5. Meet with your accountant early.
6. Budget to pay your taxes on time.
7. Consider consolidating outstanding
debt.
8. Plan your charitable contributions.
9. Meet with your attorney.
10. Consider revising your W-4.
1. Organize
your bank and credit card statements.
You should have one statement for every month for every account
and they should be organized by month. For your checkbook, pull
out all your canceled checks from each envelope and organize then
into three piles: deductible, maybe deductible and nondeductible.
The deductible pile is pretty straightforward and will mirror what
you have done in the past. The maybe deductible is the best pile
and the one that needs a little work.
This is especially important for self-employed
taxpayers. For example, you bought season tickets to sporting events
to which you invite clients; you might be able to claim the expense
as a
business tax deduction. Remember, your business entertainment
is only deductible if you can show a business purpose and who you
entertained. Your appointment book and the credit card summary or
original receipts are your best sources for supporting
your deductions.
If you do not run your own company, you still
may find some expenses in these statements that you
might be able to deduct. Don't forget about employee business
expenses for which you weren't
reimbursed. Most credit card companies will send you a summary
of all your charges for the year, which is invaluable in organizing
your potential deductions.
2. Save
your important tax documents.
In January and February you received statements
labeled "important tax documents" from banks, brokers,
lenders and employers. A few more may still trickle in. Compare
these to your bank statements, canceled checks and brokerage accounts
to make sure you received all the information you will need to prepare
your tax return. If you're missing any statements, call the errant
issuer and have them send you a copy. This is especially important
if you moved during the year.
3. Get
off to an early start each year on funding your pension or IRA accounts.
If you're not maximizing your 401(k) contributions, consider bumping
it up a little to defer some of that raise you received. You can
fund this year and next year's IRA contributions at the same time
and let the money start accumulating tax-free earlier. Bankrate's
IRA
Center is a good place to start.
4. Look
at your business structure.
If you're self-employed, you may want to consider the advantages
of incorporating
your business. An individual who incorporates his business will
generally pay less in taxes, especially self-employment/FICA
tax.
5. Meet
with your accountant early.
The closer to April 15 that you get, the busier your accountant
gets. And just like anybody who has too much work, some of it doesn't
get his full attention, especially when he starts working 12- to
14-hour days. If you visit your accountant and he looks like he's
overwhelmed, consider taking an extension
of time to file your income tax return so that you both have
the opportunity to adequately review your taxes.
6. Budget
to pay your taxes on time.
If you don't pay what you owe by April 15, you'll pay penalty and
interest for paying afterward, even if you file an extension. If
you file an extension, make a good-faith effort to estimate what
you'll owe and pay it with the extension. If you just can't come
up with the cash for your tax bill, the IRS offers some other
payment options. And if you're required to make estimated
income tax payments, remember that the first installment is
due on April 15, the same day as your annual tax filing.
7. Consider
consolidating outstanding debt.
Debt on credit cards, car loans and other personal debts could offer
you a tax break if it is consolidated into a home equity loan. Interest
paid on these borrowings is generally not deductible (unless business
related), while interest on home equity loans is generally deductible.
In many cases, the deductibility
of interest on home mortgage debt makes this type of loan a
tax-smart way to consolidate all your debts. However, as with all
debt, consolidation loans do have some potential
pitfalls.
8. Plan
your charitable contributions.
A little planning here can help you maximize your deductible
donations and also satisfy your obligations. Obviously, the
gift of cash is always appreciated and nowadays some organizations
even take plastic. Gifts of property are also deductible and gifts
of appreciated stocks are the most tax advantageous. Normally if
you earn a dollar and give it to charity it's a wash on your tax
return: you don't pay tax on what you gave away, but then again
you don't have it either. If you bought stock at $10 with those
earnings and it grew to $100 and you gave it away, you don't recognize
the gain and you get a $100 deduction. If you sell the stock and
give away the $100, then you're back to a wash. If you don't have
stock to give, you can still get a deduction for donations of household
items and clothing given to a charitable organization.
9. Meet
with your attorney.
Your attorney should review your wills and other documents to determine
that they are still in accordance with your wishes. If you haven't
done your will and you have children or property then your attorney
should advise you of the risks that you are taking and should get
working on these indispensable documents. If you're in business,
your attorney should also update your corporate minute books to
reflect the business activity and decisions for the year or years
since the minutes were last done.
10. Consider revising your
Form W-4.
Adding or subtracting exemptions can help you
make more accurate tax payments to the Internal Revenue Service.
Just be sure you accurately compute the number of withholding
exemptions to claim on your Form W-4. And it doesn't hurt to
periodically review your withholding, because adjusting
it as necessary to pay only what you owe is to your tax advantage.
Bankrate.com writers base their answers on our editorial
content and advice of financial professionals. We make no claims
or representations about the accuracy, timeliness or completeness
of such content, advice or the answers provided to you. Our content,
advice and answers are intended only to assist you with your financial
decisions. However, by its nature such information is broad in scope.
Your financial situation is unique, and our content, advice and
answers may not be appropriate for your situation. Accordingly,
we recommend that you get different opinions and seek the advice
of your accountant and other financial advisers before making any
final decisions or implementing any financial or investment strategy.
|
