Tax cleaning

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:

Portfolio investments

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.

Donations

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.

Withholdings

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.

Distributions

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 31^st. If you don’t take the distribution timely you will certainly pay a penalty for it.

Tax payments

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. 

Be Aware: Four Deductions That Could Cost You

There are a few deductions that you want to pay attention to this tax year. With the financial climate the way it currently is, every little bit will count.

Deduction Alert #1 - Out of pocket charitable contributions: Many give cash to charity organizations and never remember it when the tax return is filed. Take some time now to think of the times you gave cash to charities and write the occasions down. It would be great to obtain receipts for these contributions if you can. Also please remember if you used your vehicle for charitable purposes record the mileage. You are able to deduct fourteen cents per charitable mile driven.

Deduction Alert #2 – Education Tax Credit Expanded: You will notice a new credit on your 2009 tax return. Its name is the American Opportunity Credit. This credit will grant a rebate up to $2,500 for each qualifying student in their first four years of college. There are income restrictions for receiving the full credit. These restrictions begin at the modified adjusted gross income for individuals of $80,000 and $160,000 for married couples.

Deduction Alert #3 – Energy-saving home improvements: The purchase of biomass fuel stoves, qualifying skylights, windows, outside doors along with high-efficiency furnaces, water heaters and central air conditioners can also qualify for a tax credit.

Deduction Alert #4 – State Taxes: That’s right, state taxes are deductible in 2009. If you had to pay state taxes this past spring you can be granted a deduction.