The tax deadline may have just passed but planning for next year can start now. Being organized and planning ahead can save you time, money and headaches in 2013. Here are six things you can do now to make next April 15 easier.
1. Adjust your estimated tax
If you’re self-employed, did you receive a refund for your 2011 taxes because you paid too much in estimated tax? If so, you should make sure the same thing doesn’t happen this year. When you receive a refund it means you gave the IRS a tax-free loan. You should pay the minimum estimated tax possible without incurring an underpayment penalty. You’ll do so if your estimated tax payments amount to 90 percent of the tax due for 2012 or 100 percent of the tax you paid for 2011 (110 percent if your adjusted gross income is more than $150,000).
2. Store your return in a safe place
Put your 2011 tax return and supporting documents somewhere secure so you’ll know exactly where to find them if you receive an IRS notice and need to refer to your return. If it is easy to find, you can also use it as a helpful guide for next year’s return.
3. Organize your record-keeping
Establish a central location where everyone in your household can put tax-related records all year long. Anything from a shoebox to a file cabinet works. Just be consistent to avoid a scramble for misplaced mileage logs or charity receipts come tax time.
4. Shop for a tax professional early
If you use a tax professional to help you strategize, plan and make financial decisions throughout the year, then search now. You’ll have more time when you’re not up against a deadline or anxious for your refund. Choose a tax professional wisely. You are ultimately responsible for the accuracy of your own return regardless of who prepares it.
5. Prepare to itemize deductions
You should itemize deductions only if they exceed the amount of the standard deduction. For 2012 this is $5,950 for singles and $11,900 for married people filing jointly. If your expenses typically fall just below the amount to make itemizing advantageous, a bit of planning to bundle deductions into 2012 may pay off. An early or extra mortgage payment, pre-deadline property tax payments, planned donations or strategically paid medical bills could equal some tax savings. See the Schedule A instructions for expenses you can deduct if you’re itemizing and then prepare an approach that works best for you.
6. Make retirement contributions now, rather than later
Contributions to retirement accounts such as a 401(k) or IRA are one of the best tax breaks the self-employed have. Once you establish such an account, you have until the due date of your tax return for the next year (April 15 of the following year plus extensions) to contribute to the account and take a deduction. However, you’ll save more in taxes if you contribute now, rather than waiting until the last minute. This is because all the income your retirement accounts earn is tax-free.
Stephen Fishman is a tax expert, attorney and author who has published 18 books, including "Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants," "Deduct It," "Working as an Independent Contractor," and "Working with Independent Contractors." He welcomes your questions for this weekly column.
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