Telling Tips, formerly Tuesday Tips, is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
Okay, so you’re saying ‘Reisman’s tax season was too much for him.’
No, says I. What I’m saying is to make your tax preparation easier and more profitable.
To begin with, pile all your potential deductible receipts in one spot, or if you want to get a good jump start, separate them into categories, like sales tax, windows, appliances, medical, work related, etc.
Don’t be afraid to call your tax preparer. Keeping up on the changes and potential changes is his job. And why not give him a good laugh when you tell him that your barber gave you a hot tax top. I mean tip.
Calling your tax preparer before a pre-mature withdrawal can save you a bundle in retirement money. (One client ended up paying 45 percent of the withdrawal in tax and penalty.) How much tax will refinancing save? Should the medical bills be paid this year or next? Can I deduct my mother’s medical bills? How about my mother?
Thinking about starting or expanding your family – for tax purposes, think March. Why, you get a tax deduction for the child for the whole year, even if the birth date is December 31. (One client’s child was born at 1:30 a.m. on January 1st. Sorry.
Was your refund very high, or did you owe? Give your employer a new withholding certificate (W-4), which is on the front page of IRS.gov.
Oh, but you hate record keeping. Okay, then, let modern technology help. There are smart phone applications to help you keep track of mileage, and pictures of receipts and business lunches, or picture proof of clothing donations. Why not scan your receipts into your computer and classify them at that time?
Looking to save on next year’s return? You are receiving a two percent increase in your paycheck as your Fica tax has been reduced to 4.2 percent from 6.2 percent. Why not add two percent to your 401(k) or other retirement plan?
Didn’t take advance of the residential energy credit? It’s still available, but greatly reduced. The max for 2011 is $500 and reduced for the total credits you took from 2006 to 2010, and the credit for windows is limited to $200, again reduced for prior credits. (Where are those tax returns?)
And keep your ear to what’s going on in Congress. Watch for home equity line of credit and second home interest to be reduced, as well as a tightening of contributions. The alphabet soup of tax deductible retirement plans may get an overhaul, and employers may not be able to deduct all of the insurance they are presently providing for you (so you may have to chip in).
Mark your calendar to call and possibly meet with your tax preparer in late summer or early fall.
Preparing for next year’s tax return begins now. It’s your money to save or spend.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.