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Now is a Good Time to Start Planning for Next Year's Tax Return

Memorial Day signals the unofficial kickoff of summer for many: school is winding down, the weather is getting warmer, flowers are in bloom… what – tax planning is not on your mind?  The tax deadline may have just passed but planning for next year can start now.  Taking time now to get organized and to plan ahead can save time, money, and headaches in 2013. Here are seven things you can do now to make next April 15 easier and potentially keep some more money in your pocket.

  1. Adjust your withholding.  Did you receive a refund last year that may have been a little too big?  Now is a good time to review your withholding and make adjustments for 2012, especially if you would prefer to take home more money from each paycheck, effectively giving yourself a raise.  If you owed at tax time, perhaps you would like next year's tax payment to be smaller.  Use IRS's Withholding Calculator at http://www.irs.gov/individuals/article/0,,id=96196,00.html.
  2. Review your paycheck. Make sure your employer is properly withholding and reporting retirement account contributions, health insurance payments, charitable payroll deductions and other items. These payroll adjustments can make a big difference on your bottom line.  Correcting an error in your paycheck now gets you back on track before it becomes a huge hassle.
  3. Store your return in a safe place.  Save your 2011 tax return and supporting documents somewhere secure so you will know exactly where to find them if you receive an IRS notice and need to refer to your return.  If it is easy to find, you can also use it as a helpful guide for next year's return.  Consider scanning all of the documents and saving it to your home computer or to a flash drive to reduce clutter around the house.
  4. Organize your recordkeeping.  Establish a central location where everyone in your household can put tax-related records all year long.  Anything from a shoebox to a file cabinet works.  Just be consistent to avoid a scramble for misplaced mileage logs or charity receipts come tax time.
  5. Work with a tax professional.   If you use a tax professional to help you strategize, plan and make financial decisions, then consult with him or her now to see what ideas can be implemented to achieve their full benefit for 2012. Or if you prepared your own tax return last year and vowed “never again” to do it yourself, start interviewing CPAs now; you can take your time when you are not up against a deadline or anxious for your refund.
  6. Strategize to itemize deductions.  If your expenses typically fall just below the amount to make itemizing advantageous, a bit of planning to accelerate deductions into 2012 may pay off.  An early or extra mortgage payment, pre-deadline property tax payments, planned charitable donations or strategically paid medical bills could result in some tax savings.  Sometimes something simple, like making your January payments just a few weeks early, can make the difference.
  7. Strategize tuition payments.  The American Opportunity Tax Credit, which offsets higher education expenses, is set to expire after 2012. It may be beneficial to pay 2013 tuition in 2012 to take full advantage of this tax credit, up to $2,500, before it expires.

I work with small-to-mid sized businesses and individuals to effectively plan for taxes.  If you have questions about jump starting your tax planning for 2012 please contact me at bgreenberg@slsf.com or 847.779.6206.