Mid Year Tax Planning Ideas

From TaxSlayer.com… some of these are too late to do but will work for next year.

Although TaxSlayer.com can’t promise everyone a refund, we can say if you follow these 8 tips you should be on your way to a refund that should help you pay down your holiday debt!

  1. Charitable Donations– Take your gently worn goods to the Salvation Army or Goodwill.  Clean out your closet before the end of the year and receive a potential deduction that you will benefit from.  Now is also the time to start looking for all the cash donation receipts that you have received throughout the year.  Remember, the IRS needs you to substantiate every penny- so hold on to those receipts!
  2. Review your paycheck stub- Most people forget that they may have donated through their job or paid Union dues.  Always hold on to your last paycheck stub and review it for deductions.  If you have any questions on whether something is tax deductible or not use our helpful knowledge base.  We have hundreds of articles that can help.
  3. Child and Dependent care– Do you pay daycare expenses for a qualifying child that is under the age of 13 or had a dependent who was physically or mentally disabled and lived with you for more than half the year?  Did you pay for summer camp that specializes in soccer or computers?  If so, you need to start getting your receipts in order to claim the Child and Dependent care credit.
  4. IRA contributions– Normally, you have to claim your deductions by December 31, 2012 in order to take it on your tax return.  But if you qualify to deduct IRA contributions, you can make a contribution by April 16, 2013 and claim it on your 2012 tax return.  If you are in desperate circumstances this late deduction may be worth looking at in the near future.
  5. State taxes paid- If you were one of the ‘unlucky ones’ and owed state income taxes you may qualify to deduct that payment on your 2012 tax return.  If you owed your state income taxes and you paid them in 2012 you can deduct those as an itemized expense.  Review your check register and get your deduction this year!
  6. Alimony payments– Unfortunately, all relationships don’t work out.  If you and your former spouse have called it quits and you have to pay alimony don’t forget to write off those alimony payments.  Just look at it as the bright side to ending the relationship J.  And for the former spouse that is receiving alimony- your monthly payments are taxable and you must include them on your tax return.  One last point- child support isn’t eligible to be written off unless it is stated as an alimony payment in the divorce decree.
  7. Review your filing status– Most people don’t understand the power of choosing the correct filing status.  If you recently had a major life event such as getting married you can choose between Married Filing Joint versus Married Filing Separate.  In most cases, it will benefit most couples to file Married Filing Joint.  If you are unmarried and paid more than half the cost to keep up your home and have a qualifying dependent then choosing Head of Household versus Single will benefit you.  In addition, most people don’t know that they could claim a qualifying relative (such as a brother, sister, parent, or grandparent to name a few) that doesn’t live with them.  This could possibly change you from Single to Head of Household and/ or give you an extra deduction.  Check out our knowledge base for more information on filing status.
  8. Change your withholdings- Now is the time to look at your withholdings.  If you started working, received a raise, or took a pay cut these things could have an impact on your tax return for the upcoming year.  Go to your personnel department and look at your withholdings to make sure they are in line to meet your expectations for the New Year.  If they aren’t, complete another W-4 and submit it.
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