Tip #250 - Get Ready For Next Year's Taxes. April 15 has come and gone, and I'm sure many of us are not sad to see it go because it means we have 365 days to worry about next year's taxes. Or do we? Well, technically we do. We can put the tax forms away, not worry about withholdings or charitable contributions or deductions or anything until nexzt year. But if we are smart and want to minimize the amount of taxes we pay, we should start planning for next year's tax return. That means getting out the tax return that we just completed and reviewing it.
Did you overpay by a lot this year each pay period and get a huge refund? Or did you underpay and owe a penalty? Then go back to your human resources department and fill out a form to change your withholding. Did you keep lousy records of your charitable contributions and therefore not take full advanatage of this deduction? Then set up a file or some kind of recording system to keep track of your charitable giving. Did you pay January's mortgage bill on December 31 to take advantage of an advance tax deduction? Make a note on your planning calendar to do so in 2010.
These are just some examples of some tax preparations that you can start to do now in advance of next year's tax return. Now is the best time to do it as your return is fresh in your mind. Write down the items that you want to change or keep better records of. Look at what areas of your tax return you think needs more research (for example, IRA deductions). Some changes can be made immediately such as adjusting your withholdings. Others may need to take place throughout the year such as paying quarterly taxes on time with more accurate estimates so you don't owe penalties. Others may involve keeping better records. Take an hour or two this week to look through your return. Take some notes or write reminders on your calendar and then you can forget about your taxes until next year - maybe not until April 15 but at least until January 15.
In Real Life (IRL) - I just finished my taxes tonight. No, I wasn't tardy in doing them. I actually did our federal taxes in late March. But in Virginia our state taxes aren't due until April 30 (which I actually think is awfully nice of them to give us two weeks after the federal is due to do them), so I just did them today. After going through the process of completing them, I came up with a list I need to change for next year.
1. We got way too much back in tax refunds. While the money is always a nice "gift" each spring, it would be much better to have this money to use throughout the year - invested and earning interest. I need to have my husband change his witholdings at work.
2. Keep better track of school expenses. Every year around tax time I need to call the school and ask them for the amount I have paid to them. If I kept better records, I wouldn't have to do that.
3. Get eBay reports throughout the year rather than just at year end. If I run them after each month ends, then it saves a lot of time at the year-end.
4. Keep track of ALL charitable contributions. I know I missed a few of them this year because I did not have receipts for them.
Those are just a few things that I need to change in the coming year as far as taxes go. Have you reviewed your taxes and vowed to make changes or improvements? If not, now is a good time to do so.