The happiness and warmth of the holidays will soon come to an end and individuals will be forced to return to reality.
Christmas bills will begin showing up and tax season comes shortly after.
“Taxpayers can make moves to reduce their 2011 tax expense all the way up through Dec. 31, but that window of opportunity closes on New Year’s Day, said John Kibiger, a Jackson Hewitt franchise owner. “It’s critical to start thinking about your taxes now, while these moves can still be made.”
Below are helpful tips to get ready for the upcoming tax season. By starting early, hidden tax breaks may be available that could garner you more money. Also keep in mind that in 2012, taxes are due Tuesday, April 17.
* Make an appointment – If you are holding off on a major medical procedure until after the holidays, make an appointment as soon as possible to increase your 2011 medical expense deductions.
* Give and receive – Giving cash and non-cash donations to charity can give back on your taxes. Volunteering your time counts too, which means volunteers may be able to deduct their out-of-pocket expenses on a tax return.
* Go green – If you are planning to buy energy efficient windows, insulation to your home or appliances, do it now. Up to $500 in credit may be available for making energy-related home improvements.
* Pay early – Taking care of your January mortgage payment, 4th quarter state tax estimate or winter semester tuition now lets you claim these payments on your 2011 tax return.
* Get organized – One of the reasons most people panic close to the tax due date is because nothing has been kept in order. Having a folder system for keeping receipts, a ledger for registering income and payout or a combination of organizing techniques will all make tax preparation a little easier. You may even want to invest in software that will let you record your financial data as you go and then give you the option of printing out reports at the end of the year.
* Do your homework – review all of the tax changes this year so that you can take advantage of all the tax deductions coming to you.
* Look to the past – Seeing how you deducted in past years can help you prepare for taxes in 2012. The added bonus of reviewing old returns is that you may find errors or missed deductions that could land you an unexpected check from the IRS. If you need another copy, visit irs.gov.
* Meet with a tax professional – Talk about those places where you have maximized your deductions in the past. Look at places where you could be getting additional deductions or credits. Having a plan is always the best way to start down a new path.
* Save, save, save! – By increasing retirement plan contributions you can reduce your income for tax purposes. Taxpayers can contribute up to $16,500 to a 401(k), 403(b) or Federal Government Thrift Savings Plan; those over age 50 can contribute an additional $5,500.
Sources: jacksonhewitt.com; abcnews.com; theonlinetaxprofessional.com.
