Tips for 2011 Tax Office

FinanceTax

  • Author Cullen Bendure
  • Published March 19, 2012
  • Word count 866

The new year is a time to appreciate family and friends. It's a time to reflect on life's twists and turns. It's also a time to look forward, and focus on your tax goals in the up-coming year to make certain that you are able to keep as much of your hard-earned money as possible. From a tax perspective, the beginning of a new year is the best time to identify and correct bad habits, take stock of your current financial situation, and set goals to help you stay better prepared when it comes to filing your taxes. After all, New Year's tax resolutions shouldn't be overlooked. With these tax tips you'll be sure to plan ahead, stay tax alert, and save a bundle of money on this year's income.

Try IRS e-file IRS e-file is the safe, easy and most common way to file a tax return. Last year, 79 percent of taxpayers - 106 million people - used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

File a new W-4. Consider filing a new W-4 with your employer now - and again in March. In a last-minute push, Congress extended the 2% reduction of Social Security taxes from paychecks. Alas, it was only extended for two months. Hopefully, they will find a way to extend this payroll benefit during their upcoming tug of war in January and February. Increase your withholding if your deductions have decreased due to lower mortgage interest rates or payments, or because your children are no longer dependents. Also, in 2012 there is no longer a deduction for the private mortgage insurance (PMI) payments, worth several hundred to several thousand dollars a year.

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

Track tuition, books, computers, and fees that you pay on behalf of your dependent child because you may be able to claim an education credit or deduction for the amounts you pay. And remember, if the child goes away to school, and you are providing more than 50% support, you may still claim head of household status even during the absence of the child.

Sole proprietors (including employees who also have a part-time business) have a wonderful opportunity to open a solo 401K. The plan must be opened by December 31 but the funding of the plan can be done in 2012.

Tax returns will be due April 17 this year. There are two extra days to file because April 15 is a Sunday and April 16 is Emancipation Day (a legal holiday in the District of Columbia).

Use your flex account or lose it: Some employers require employees with flexible spending accounts (pretax dollars that pay out-of-pocket medical and childcare expenses) to forfeit contributions that go unused by Dec. 31. If you have an FSA, check your company's rules. If you have cash sitting in the account and your deadline is year-end, spend it to avoid leaving money on the table.

Accelerate income. Most tax experts will tell you to pay no tax before its time. However, impending income tax rate changes might make 2012 the exception to that traditional tax adage. The top ordinary income tax bracket in 2012 is 35 percent of annual taxable income. If Congress doesn't act, the highest tax rate will go to 39.6 percent in 2013. So, if you're in the top tax bracket, you might want to accelerate income into 2012 and pay taxes at the lower rate.Keep important information relating to the validity of deducting your dependent in your tax file. This includes paperwork such as school records, which show the child lived at your address, and records to prove that you provided more than 50% of the child's support.

Final suggestion: Make a New Year's resolution to never look for end-of-the-year tax tips again. You should be consulting your enrolled agent (EA) or other tax pro on a year-round basis. Your EA can help you make tax savvy decisions throughout 2012.

Set up your 2012 tax file. Pull out your label-maker and make new labels on file folders, expanding files or drawers to start storing your 2012 records and receipts. Now you have a place where you can consistently put all relevant receipts and records for the year.

Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you're filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer. Instant Tax Associates 1145 Silas Creek Parkway Winston Salem, NC 27127 (336) 724-1111

Tax Preparation Instant Tax Associates 1145 Silas Creek Parkway Winston Salem, NC 27127 (336) 724-1111

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