Emma Johnson for The Real Deal writes: Filing taxes for the first time? Or maybe this is the year you vow to be smart about your returns.
Either way, here is all you need to know when filing your taxes this
year and what you need to know going forward.
Commonly missed deductions
Most people take the standardized deduction, but accountants warn
that it might make sense to file itemized deductions. For the 2012 tax
year, the standardized deduction is $5,950 for a single person, $8,700
for head of household and $11,900 for a married couple filing jointly.
Commonly forgotten deductions, according to the IRS, include:
• Out-of-pocket charitable expenses. Giving
to your church, donating to the school bake sale, offering goods to the
Salvation Army and buying raffle tickets for your local community
center can all be written off—even if you pay with singles out of your
pocket. Be sure to get receipts for donations totaling more than $250. (Get $10 offTurboTax Deluxe software with TurboTax sales.)
• Job-hunting expenses. Itemize any
money paid for résumés, traveling to interviews (including meals, if you
had to stay overnight for an interview, and 55.5 cents per mile if you
drove your own car, plus tolls and parking), advertising yourself and
paying staffing and head-hunting fees.
• Mortgage interest points. Did you
take advantage of the record-low interest rates and refinance in the
past couple of years? You can write off any prepaid interest points as
they are paid over the terms of the loan. (Through April 30, get $25 off in-store tax preparation services at Jackson-Hewitt.)
You can’t pay your tax bill
It can seem like a
nightmare: Your accountant completes your tax returns and finds that
there will be no return at all. Your bill is bigger than your savings
account. What do you do?
• File by April 15. If you’re worried
about what you might owe, ask your accountant to file an extension on
your behalf. This can push back payments until October. Late
filing—without an extension—will cost you up to 5 percent of the total
amount owed for every month you’re late. Ouch! (At least you can save on
the filing itself though: Get 50 percent off Liberty Tax preparation services at participating offices with Liberty Tax coupons.)
• You really can’t pay. If you don’t
expect to come up with what you owe, ask for a payment plan. In the past
couple of years, the IRS has offered its Fresh Start program to help
self-employed people and small business owners contend with unpaid tax
bills of up to $50,000. Others can expect to pay late-payment penalties
of 0.5 percent per month—up to 25 percent of total due—up until all back
taxes are settled, as long as you work out a plan with the government.
Plus, you will owe 3 percent interest for the period your taxes are
late. That’s a lot, but it’s less than most credit card offers. (Get 30 percent off H&R Block tax software with H&R Block coupons.)
• Call up the IRS. Or have your
accountant call for you and negotiate a lower bill. Be prepared to file
many extra forms and do a lot of haggling. Consider hiring a tax
settlement company that will negotiate a lower back-tax bill on your
behalf, but exercise caution, as some such services have been found to
conduct fraudulent practices in recent years.
Smart ways to spend your refund
Getting a refund?
Yay you! For tax year 2011, the average refund was about $3,000. Think
critically about whatever windfall you get (no matter that it was your
money all along!) and invest in ways to make it pay you back.
• Invest in your retirement. Any funds
you contribute to your 401(k) plan before April 15 are deductible right
off the top of your income. Sweet! Also awesome: Contributing to a Roth
IRA isn’t deductible, but any funds you withdraw from it in retirement
are not taxed. Starting in 2013, the limits have been raised. You can
now contribute $17,500 to a 401(k) and $5,500 to a Roth IRA. (Save $20 on Quicken personal finance software with Quicken coupons.)
• Hire a financial planner. For a few
hundred dollars, this professional can help you set goals, get you out
of debt, come up with a savings and investing strategy and help you
accumulate hundreds of thousands of dollars over a lifetime. Open a TD Ameritrade account with at least $5,000 and access the broker’s financial experts to help create a financial plan.
• Invest in greening your home. Replace
a refrigerator from the ’70s with an energy-efficient model and save
$200 per year on your power bill. Or hire a company to conduct an energy
audit and suggest ways to make your home more efficient. These can run
around $300.
New for the new year
Get up-to-speed now on how the next tax laws impact you. A few highlights:
• You’re less likely to pay the Alternative Minimum Tax
(AMT). The exemption threshold for married couples is projected to be
bumped up to $80,750 (from $78,750) for married couples filing jointly
and $51,900 (from $50,600) for single or head-of-household filers.
• Earned income tax credits were increased in some instances for the 2013 tax year. Check out this IRS site for details, but the maximum adjusted gross income is now $46,227 for couples with at least three kids.
• Payroll taxes are higher for 2013. The tax returned to 6.2% from 4.2%.
Thursday, April 4, 2013
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment