I am sure you have heard of spring cleaning, but tax cleaning? Since it is the end of the year, it is time to do some tax cleaning. You ready? Ok great, let’s start:
Begin cycling through your investment portfolio; if you have sustained losses on some of your investments sell them now. Don’t worry if you like the investment buy it back immediately with just a few clicks of the mouse. We want the loss for your tax return.
Go through your closets, basements, garages and other “storage” areas. There are hidden deductions, I meant donations there I am sure. Search for useful things that you haven’t used in the last few months or forgot that you had. Donate those items to a tax exempt organization before the end of the year. Be sure to retrieve a receipt from the organization signifying your name, the date the item(s) were donated and a description of the item. Be sure the organization is a charitable organization with its tax exemption currently in place.
Maybe you have some extra cash lying around, if so make a yearend contribution to your favorite charity.
If you owed money to the IRS or state you reside in over the past year or two, it maybe a good idea to increase your withholdings at work. Do this by completing Form W-4 and submitting it to your employer immediately. Be sure to claim one or two less exemptions that you originally did. Note: you want to do this soon as some employers don’t process W4 changes right away. You can change your W4 back to its original number of exemptions at the start of 2012.
If you are over 70 ½ years of age you are required to take a distribution from your IRA or employer sponsored plans. Be sure to do this before December 31st. If you don’t take the distribution timely you will certainly pay a penalty for it.
If you pay estimated taxes during the year, make your January 2012 payment before Dec 31, 2011. This will assist you in lower any potential tax burden in 2011.
You have some information to start with, now start cleaning! Speak with your tax advisor about how this information will impact you specifically. Tax planning is unique to the individual, his/her income and their overall financial health. If you don’t have a tax advisor then visit us at www.thetowlesgroup.com.