It’s the beginning of February and your tax documents will be piling up by the day as a new mail from your mortgage companies, banks, and investment companies are sent out to you. As you begin to stack up your pile of information to bring to the CPA or accountant, did you ever wonder if there are still ways you can save money on your 2013 income taxes before you hit the SEND button to the IRS? Here are my 5 smart money moves on tax tips before your file away for another year.
- Contribute To An IRA- Whether this is a Traditional IRA or for small business owners/freelancers a SEP-IRA, these types of IRA contributions could still potentially be tax deductible for the 2013 calendar year even though the contributions and accounts were opened in 2014. The biggest mistake individuals make is not investigating how these vehicles work or the adjusted gross income limits that would make things like the Traditional IRA tax deductible.
- Should You Itemize?- Most individuals are still under the myth that you have to own a home to be able to itemize your deductions. If you have plenty of unreimbursed employee expenses, state income taxes, and charitable contributions, it still may make sense for you to itemize your deductions which could save you tax money on the bottom line. For those that already itemize, gathering all of your documentation including checks you wrote for charitable contributions are important to maximize your deductions.
- Don’t Shy Away From Legitimate Deductions- In the “world’s dumbest taxpayer moves”, I often hear people espouse the notion that it is a good idea to avoid certain deductions in fear of getting audited. You either DO or DO NOT have a real tax deduction. Avoiding deductions like the home office, non-cash charitable contributions, auto mileage, etc. are all deductions you need to examine closely to get what you deserve on your tax return.
- Provide The Right Dependent Taxpayer ID’s- Since there is more divorce today, be very clear about which spouse or partner is able to claim which child on their separate tax returns. Also, make sure you provide the correct taxpayer id’s or otherwise you could lose the $3,900 deduction and have it denied by the IRS.
- Extensions Won’t Necessarily Stop Penalties- Often, taxpayers believe if they file an extension that it won’t be any different than filing by April 15th. The truth is that if you extend to file your tax return by October 15th and you OWE the IRS money, you’ll be accruing additional money on your tax bill over those six months. This is an important decision to make if you file an extension.
The concept of tax planning and tax preparation are two very different and distinct concepts. Although you may be late to the party, make sure you either personal review all aspects of your tax return or go hire a professional to provide you with some assistance. Try these smart money move tax tips to see if you can potentially save a little bit of money before April 15th!!
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