The halfway point of the year is a good time to look at where you stand with your taxes. More importantly, if you think that you need to make some changes, it’s still early enough for the steps you take to make an actual difference for your return.
File your 2012 return
Haven’t filed your tax return yet? The deadline for extension filers is Oct 15. Don’t wait until the last minute. Save some penalties and fees. Additionally, waiting to the last minute may also cause you to overlook a deduction or credit that could cut your tax bill. Or worse, make a filing mistake.
Adjust your withholding
Some people view tax refunds as forced savings accounts. That’s not necessarily a good idea. Budget your finances throughout the year and keep the money in your account – not Uncle Sam’s. The ideal payroll withholding situation is to have just enough withheld from your paychecks to come out as close to breaking even at tax time.
Changing your withholding is easy. Use a W-4 withholding calculator such as the one available at Taxbrain.com, then stop by your payroll department and submit a new W-4.
Evaluate your estimated taxes
If your income isn’t subject to withholding, quarterly tax payments are required. By making the four extra payments a year, you’ll help ensure you don’t underpay your taxes. If you owe too much at filing time, you could face a tax penalty.
Look at what you’ve paid via your April and June 1040-ES filings and see if your schedule is still on track. If not, now’s the time to make adjustments for September and January estimated tax payments.
Do some summer cleaning while the days are long and the weather is good. Donate those unwanted household items. Find out what the items are worth and save those receipts for tax time.
Through a partnership with Charity Deductions, Taxbrain users have a simple and accurate way to maximize their charitable contributions and reduce their taxes. With a database of thousands of items, one can get fair market value for their donated items.
Child and dependent care credit
Keep those day camp receipts. You can count the costs toward your child care credit claim. The actual credit can be up to 35 percent of your qualifying expenses.
Contribute to your retirement plan
For 2013, the maximum you can contribute to all of your traditional and Roth IRAs is the smaller of: $5,500 ($6,500 if you’re age 50 or older), or your taxable compensation for the year. The IRA contribution limit does not apply to rollover contributions or qualified reservist repayments. Your traditional IRA contributions may be tax-deductible. (Roth IRA contributions aren’t tax deductible.) For more information on IRAs, see IRS Topic 451.
Stay on track with your employer’s 401(k) or other retirement plan, if offered, especially if they have matching contributions. While you do not actually take a tax deduction on your income tax return for your 401(k) plan contributions, the contributions you make are with pre-tax dollars. The result is more money in your take-home pay each pay period.
Buy a house
If you qualify, interest rates are still at near-historic lows. Not only are there bargains to be had, but there is an abundance of choices. At some point, Washington, D.C. might cut some of those tax perks, but that’s not likely going to happen soon. Take advantage of the home ownership opportunity now if you can.
Home energy improvements
Reduce your utility bills while reducing what you owe to the IRS. Go green – solar, wind power, fuel cell, geothermal systems are all qualifying improvements. Eligible improvements to your home could qualify for a tax credit equal to 30 percent of the cost, including installation, without any cap on the credit amount. For more information, visit EnergyStar.gov
With a Taxbrain account, you can get all the free technical support you need to prepare your own taxes. Learn more, visit Taxbrain.com today.