Your new goal for 2014 should be to gain a higher level of understanding about your income taxes, plan for your tax liability and get organized. This will make tax season much easier and could save you some of your hard earned money.
Below are some simple tips to help you achieve your new goal.
Create a 2014 tax file. You can use a folder, bin or electronic file on your computer. Include all transactions and documents that might affect your 2014 tax return.
If you use the electronic file, all you have to do is scan all your tax documents and move them into the folder on your computer. The great thing about using an electronic file is you can easily e-mail the folder to your tax preparer when it is time to file. An electronic file also takes up much less room and will not clutter your desk. It is important that you back up your electronic file so you will not lose your tax file if anything happens to your computer.
Add important notes on your documents to help your tax preparer understand each transaction. You should include documents such as W2’s, K-1s, 1099s, property sale documents, escrow papers, property tax receipts, vehicle registration receipts, receipts for any tax deductible purchases, and donation receipts.
If your financial position will change this year, schedule a tax planning appointment halfway through the year. Financially altering events that occur in 2014 include marriage, divorce, having a baby, buying a home, selling a home or any other event that will affect your taxes. Do not try to set up an appointment in the middle of tax season. Waiting until the middle of the 2014 will assure your tax professional will have enough time to spend with you help you adequately plan for your taxes.
Fund your retirement plan. Check with your employer to see if you can contribute more to your retirement plan and confirm you are fully taking advantage of the employer match, if you have a retirement plan with your employer.
If you do not have a retirement plan, you need to open a ROTH IRA , IRA or other type of retirement plan. An investment house or bank can help you decide the best plan for your specific financial situation. This will help you plan for your future and will reduce your tax liability this year.
Prepay your income tax liabilities. If you do not prepay your income tax liabilities timely, the IRS will penalize you. You should write down your estimated tax payments and the due dates on your calendar. For 2014, the installment due dates for individuals are April 15th, June 16th, September 15th and January 15th, 2015.
Keep up with current news relating to tax legislation. The tax laws are constantly changing. You might think you know the valuable credits and deductions but Congress might have obliterated them. Keeping up with the new tax law changes will help you take advantage of all the tax credits and deductions that are available to you.