Year-end Tax Tips to Save MoneyThe 2015 tax year is quickly approaching its final days. With the New Year, the reality of filing a tax return for the old year hits everyone! April 18, 2016 (not a typo) will come upon us very quickly but what can you do in the final days to save a little money on your 2015 taxes? 1.
Retirement Plan distributions tax payments.
Pay your estimated taxes on your distribution through your withholdings. If you expect to owe $1,000 in tax after withholdings and credits for the year, you could be penalized by the IRS. Also, if your other withholdings from salaries is the smaller of 90% of the tax owe, OR 100% of what was owed the prior year, a penalty could be imposed. If you started receiving IRA distributions at the end of the year, the tax withholdings could help with your total taxes for the year. There are IRS tax tables to assist in estimating if you will owe taxes on the irs.gov webpage, or we can relay this information to you. 2. DONATE! DONATE!
Make charitable donations before the end of the year to an organization or church with cash or goods. If you take the standard deduction, the donations will not help for your tax reporting. Keep in mind when donating: - The amount to report as a donation is what was actually contributed and not a “pledge” of what you intend to donate. If you use a credit card, you can complete that pledge before year-end and pay the bill in 2016.
- Reminder that any cash contributions to qualified charities must be backed by a dated bank record or receipt. Don’t forget to get
a receipt if you are paying strictly cash in person.
- Donations of household goods and clothing must be usable to be donated. If you donate over $500, you will need an itemized receipt from the organization.
3. GAINS this year?
Offset your gains with any losing stocks by getting rid of those losing ones. It is recommended to sell your long-term capital gain stocks with your losing short-term ones in order to benefit the most on your taxes. Is it time to clean out some of those annoying losing investments? 4. Can you
ADD to a Retirement Fund? If you are eligible to open a traditional IRA, open a new one and contribute to obtain some tax benefits. There are some requirements on eligibility but if you do not have an active retirement fund, you could qualify easily. You could contribute up to $5,500 per person for 2015 to obtain tax benefits and build your retirement nest at the same time. 5. Have you been one that is required to pay
alternative minimum tax (AMT) in the past? There are new AMT exemption amounts for 2015. These are: $52,800 for a single or head of household filing; $82,100 filing married filing joint, and $41,050 for those filing married filing separate. 6. Eligible for FREE IRS expert tax assistance? If you have fallen on hard times, you could be eligible. There are certain requirements. 7.
Mailing Address to the IRS. Always ensure that the IRS has your correct mailing address to avoid not receiving any important correspondence from them that could cause you to have an escalating tax bill. It is advisable to have your tax refund send to you via direct deposit to your bank account but the IRS needs to have your current mailing address. 8. Tax Document Organizing time!
It’s year-end and time to organize your tax related documentation and categorize it all. For a personal income tax, these could include receipts for medical expenses, charitable donations, payments for estimated taxes, and education expenses. If you’re self-employed, get your expenses and income all categorized and ready to report. If you are unsure of any documentation, ask your tax preparer. 9.
FSA: Do you have a flexible spending account (FSA)? Inquire with your employer as this could help you save money in the long-run on your medical expenses as your employer take the funds on a pretax basis. Since it is pretax, your wages are lowered for tax purposes thus paying less. 10.
Other deductibles. If you are not aware of other deductions, these are some that could help if you qualify: - Job searching during the year? Some expenses including mileage and parking costs could be deductible as well anything related to the activity.
- Self-employed or a part-time self-employed? The cost of a computer or cell phone could be deductible if you use these to produce income.
It is always advisable to contact a tax professional that can answer your questions on how to reduce your taxes, what is deductible, etc. If you file your own returns, be careful and take your time. You do not want to receive a letter from the IRS later indicating that you owe additional tax plus interest and penalties as well. Have a Merry Christmas and Happy New Year …. And a great tax season!
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