10 tax resolutions for 2015
Plus, some January Tax Moves to make
Thursday, January 01, 2015
Happy New Year! I hope you had a wonderful celebration last night and are ready to face a brand spanking new tax year.
OK, maybe you need another cup (or two or more) of coffee. Or maybe you just want to wait until the NHL's Winter Classic and today's college bowl games are over before thinking about taxes. I totally understand. My TV is on and I'm flipping between hockey and the Cotton Bowl as I type this.
But soon you need to think about taxes. Not only are there tax tasks related to filing your 2014 return, but you need to consider strategies that will help reduce your 2015 tax bill.
To both ends, here are 10 tax resolutions, as well as the ol' tax blog's regular monthly tax moves to make.
First the tax goals for 2015, which I know I'll find easier to keep than the usual New Year resolutions such as lose weight, reduce stress and eat healthier.
1. Keep better tax records. This not only will make filing easier, it will ensure you get all the tax breaks to which you're entitled. This of course covers the myriad tax documents that will be showing up in snail and email boxes this month, as well as all those receipts et al you collected last year. Get those 2014 materials out and in order now so you're ready to send in your 1040 when the Internal Revenue Service starts accepting returns them on Jan. 20.
You also need to make sure you have a tax record keeping system set up for 2015. It's easier on you, your tax pro and Uncle Sam when you keep those documents in an organized manner throughout the year. That way no one has to scramble for documentation at filing time.
2. Claim all the tax breaks for which you're eligible. One of the benefits of having good records is that they could help you determine which tax breaks you qualify for. This includes tax deductions, which reduce your taxable income amount, as well as tax credits, which are better because they provide dollar-for-dollar cuts to your actual tax bill.
Be sure to check out all the possibilities -- from the more common retirement savings tax breaks to tax help in putting away college funds to the many child-related tax breaks, as well as often overlooked tax breaks.
3. File early. This is a no-brainer if you're getting a refund. When you file as soon as you can, which is Jan. 20 this year, you're tax cash will be in your bank account or hands sooner. Early season filing also is a good way to thwart identity thieves. Crooks use stolen taxpayer IDs to claim fraudulent refunds and unsuspecting taxpayers often don't learn they've been victimized until they file their legitimate returns later in tax season.
4. Don't, however, be in too big of a hurry. In the tax world, fast is good but correct is better. We all want our refunds ASAP, but if you rush your filing you might make a mistake that could actually slow down your return and refund processing. Or because you didn't have a good record keeping system, you overlooked a form that was slow in arriving. When it does appear, you'll have to amend your filing, which will undo all your early tax filing efforts.
5. File electronically. More of us every year are e-filing our taxes. It's easier. The tax preparation software programs do the calculations and move entries from one form to others as needed. It's also faster. Your entries go directing into the IRS computer system, whereas IRS employees must manually enter he data from paper returns. That also eliminates the possibilities of entry mistakes with the duplicated entries.
6. Set aside funds for taxes. For most folks, getting tax payments correct means ensuring that payroll withholding is right. You can adjust your withholding as needed throughout the year. If, however, you pay estimated taxes either because your have 1099 independent contractor income or other earnings, such as investment income, that's not subject to withholding, you have to come up with this money yourself. If you do so in a lump sum at tax-filing time, the IRS will happily take your one big payment. It also will probably send you a bill for penalty and interest because you didn't pay your taxes on the income as it was earned via quarterly 1040-ES estimated payment amounts. So set aside some money each month to go toward your estimated taxes and pay them quarterly.
7. Watch out for tax scams. Identity theft continues to be a major financial problem and it's exacerbated at tax time. Con artists use our desire to get our refunds -- or bigger refunds -- ever more quickly. For those of us who tend to owe, crooks focus on our fears of not meeting our tax obligations to try to get their hands on our money. Be careful. If you're contacted by phone or email out of the blue by someone purporting to be from the IRS, be wary. Contact the tax agency directly to find out whether the inquiry/warning is real or, more likely, a tax scam.
8. Make tax changes when your life changes. This is a perennial tax tenet, but many folks still forget, or ignore, how major life events affect taxes. If you get married, your taxes will likely change. Ditto for having a child and buying a bigger home for your growing family. The same applies if you become single this year or your kids are no longer your tax dependents. If you don't adjust your withholding taxes to reflect these changes, you could be in for a surprise, and not necessarily a good one, at tax filing time.
And now there's the Affordable Care Act, aka ACA or Obamacare, to consider. Do you still qualify for a subsidy, or as large a one, to help you pay for the mandated minimum health insurance coverage you purchased through the health care marketplace? If you don't alert Healthcare.gov or your state marketplace, you could face some costly taxes.
9. Stay on top of tax laws. Yes, I know you read the ol' tax blog (thanks!) and other tax sites. Make sure you keep doing so beyond the April 15 filing deadline. You need to make moves throughout the year (as noted in resolution #8) to maximize your tax savings. For example, inflation has bumped up the amount of money you can earn before hitting a higher income tax bracket. But if you do make more money, it also could affect your eligibility for certain tax breaks.
Don't forget about the tax extenders. After finally being renewed on Dec. 19 for the 2014 tax year, they expired again on Dec. 31, 2014. Will they be back this year? If so, when? Or will they be part of real tax reform in 2015? Stay tuned!
Then there's Obamacare, again. As I note in 10 top tax issues that matter in 2015, this is the year that many new Affordable Care Act forms and documentation requirements kick in. You can't follow the rules if you don't know them.
And most Americans also must deal with state tax matters. The Tax Foundation and Washington Post look at what's happening in revenue offices across the country.
10. Find a qualified tax pro. The IRS knows how important it is with today's complicated tax laws to have a good tax pro. That's why the tax agency Sam wants to help you find a qualified tax preparer. But don't lose touch with your tax pro after your 1040 is filed. A good tax professional can be of enormous help throughout the year. He or she can help you stay on top of tax issues that are specific to your situation and make moves that will save you tax dollars at future filing times.
Tax moves to make in January: You also can keep track of general tax moves by checking out the ol' blog's monthly tax moves over in the right column.
Some of the January Tax Moves are covered in the 2015 tax year resolutions. Others you can take care of any month, like adjusting your withholding, but they pack a better payoff if you do them early. And others, like the kickoff of the 2015 edition of Bankrate's Tax Guide, of which -- shameless plug alert! -- I'm contributing editor, are specific to the first month of the year.
You'll find them under the countdown clock that's keeping track of how long until the April 15 filing deadline.
As soon as the sports events are over and your head is clear of its midnight champagne toast haze, check them out.
And here's to a Happy New Tax Year for us all!
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