Tax Planning For Next Year
BOSTON (CBS) - Get a jump-start on next year's taxes. Set up a simple filing system. I use a folder system where I label folders; contributions, real estate taxes, estimated taxes, medical expenses, etc. You could use an envelope system as well.
A good filing system will make finding the tax information next year easier. You do need to have all of the relevant material to back up any deductions you want to take. Cancelled or imaged checks, mileage logs for your trips for charity or medical reasons, receipts, credit card bills will all be in place.
Normally, tax records should be kept for three years from your filing date, which is the period that the IRS has to audit your return, but many experts will tell you to keep them 6-7 years. Documents relating to the purchase and basis of your home, stock transactions, business or rental property should be kept in separate files until you sell the asset and then the information is filed with your tax return.
IRAs and pension information should be kept forever or until you have spent all of the money!
If you pay estimated taxes, mark your calendar with the due dates. Consider using a personal finance software package such as Quicken for your checking account. You can easily print out reports at the end of the year for your taxes. I love Quicken!
Did you miss out on any of the tax credits or deductions last year because you made too much money? Review your retirement planning.
Increasing your contribution to your retirement plan can lower your taxable income, which may put you in a lower tax bracket. With a little bit of planning on your part you might be eligible for the tax credits this year and the bonus would be a larger retirement pot!
Are you planning to get married this year? Are you going to change your name? The trend is for both men and women to change their name. If you do, make sure the Social Security Administration and the IRS both know. And make sure they have your new address as well.
Same advice if you are getting divorced and changing your name. Be sure the IRS and the Social Security Administration know your new name and where you are living.
The IRS uses the Postal Service's change of address files to update taxpayer addresses, but you may want to notify the IRS directly. And be sure to notify your employer of your new address and name as well.
