Pro Tips: End Of Year Tax Planning

As tax season is quickly approaching, a little forethought can only help your tax situation. There isn't much worse than finding out you owe Uncle Sam a chunk of change, when you were planning on that fat refund check to cover your family vacation this coming summer. I found a great article on Yahoo Finance with a couple easy, but invaluable tax planning tips. Pay special attention to Tip #5... Enjoy!

April 15 seems far off, but now is a good time to make moves that you’ll thank yourself for later. Our three tax pros answered dozens of questions in Yahoo Finance's live chat this week and here are some of their most useful tips for people preparing to file their taxes (and check out the transcript of the chat below). 1. Deductions and credits you shouldn’t miss A big mistake people make when it comes to their taxes: Forgetting expenses and what they did during the year. That can add up to some nice tax deductions – cleaning out your the closets anddonating unwanted items to charity, for instance, says Lisa Greene-Lewis, CPA at TurboTax. (Sites like TurboTax have tools that can help you track and value your donations throughout the year and transfer them to your tax return.) Here are a few deductions and credits that shouldn’t be missed: When you have dependents: There are many deductions and credits for those with dependents, including the Child Tax Credit – of up to $1,000 you may be able to claim for children under 17. The Earned Income Tax Credit is available if your wages and self-employment income fall below a certain level. How much you can earn depends on how many dependent children you have. More information here and here. Energy efficient upgrades: If you install Energy Star-approved solar-power systems before the end of 2016, you can claim 30% of the cost as a tax credit for the year you installed it. You’ll need to fileIRS Form 5695 as part of your tax return. Job-related expenses: If you are – or were – unemployed in 2014 and had job-searching costs, you may be able to deduct them. (Just note that you can deduct certain expenses for searching for a new job in your current occupation, not for a totally new line of work). More information about what you can and can’t deduct here and here. 2. If you didn’t have health insurance this year This is the first year most Americans are required to have health coverage. If you were uninsured for 3 consecutive months this year – and don’t qualify for an exemption -- you may get hit with a tax penalty for 2014. But note that the penalty is calculated on a monthly basis using pro-rated annual figures (for example, 6 months without coverage = 50% of penalty).

3. Check your withholdings Individuals should periodically check their withholdings to ensure they are in line with their true tax liability. If they are under withheld, they "may experience sticker shock on April 15 along with potential underpayment penalties. If they are over withheld, they are reducing their cash flow during the year and giving the government an interest-free loan," says Barry Kleiman, CPA and Principal atUntracht Early LLC in Florham Park, N.J. There are certain circumstances – life changes like marriage, having a child, in particular – that will change your tax liability and is good reason to adjust your tax withholdings.

4. Don’t NOT file your taxes Individuals should always file by the original or extended due date, even if they don’t have the ability to pay. Late-filing penalties are much stiffer than late-payment penalties, says Kleiman. If you don't file your return by the tax deadline and you owe taxes, you may owe an additional penalty for failure to file unless you can show reasonable cause. The assessment is 5% a month of your balance due. And not paying what you owe will add an extra charge of 0.5% each month of your tax balance amount to your overall IRS debt. Here’s more information about filing an extension. 5. Sometimes you need to consult a tax pro Sometimes you just can’t deal with doing your taxes yourself. The tax code is an infinitely complex and anxiety-producing thing, so it’s understandable to want to get professional help, especially when you’re concerned about errors on your 1040. The tax law changes constantly and thresholds are adjusted each and every year. If you don't know the law and how it applies to you, consulting with someone who’s up on the tax code is a good idea, says Vincent Cervone, principal and CPA withVincent R. Cervone & Associates in New York . Obviously, what works for some taxpayers won’t work for others, as every tax situation is different.

Contact Top Shelf Tax today to make sure you're prepared for this coming tax deadline!

topshelftax@gmail.com

435.619.6323

SOURCE: Yahoo Finance

http://finance.yahoo.com/news/live-chat--end-of-year-tax-planning-222118778.html?soc_src=copy

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