Mid-Year Tax Planning

Posted by LIVING WELL Magazine on July 20, 2012 in Articles, Finance, Finance & Planning, Local Editions, Salt Lake City, Utah

Mid-Year Tax Planning

By Joanna Johnston, CPA, Savas & Green, Salt Lake City LIVING WELL Magazine

The 2011 tax deadline may have just passed but it is not too early to begin planning for next year. You can save time, money and headaches in 2013 if you are organized and plan ahead. Here is a list of things you can do now to make next April 15 easier.

  1. Adjust your withholding. Now is a good time to review your withholding and make adjustments for this year. If you had to write a check to the IRS or the Utah State Tax Commission in April, you should consider increasing your withholding. If you got an unexpected refund, consider reducing your withholding. There are withholding calculation worksheets on Form W-4 or the IRS has a withholding calculator on their website at www.irs.gov.
  2. Store your return in a safe place. Put your 2011 tax return and supporting documents somewhere secure so you’ll know exactly where to find them if you receive an IRS notice and need to refer to your return. Your 2011 return can also be used as a helpful guide for next year’s return. If you are able to scan your return and supporting documents as a PDF file, burn it to a CD or save it to a secure hard drive for future reference. It is recommended that you keep these records forever, if possible.
  3. Organize your current year records. Establish a central location where everyone in your household can put tax-related records all year long. Anything from a shoebox to a file cabinet works. Items to save include charitable donation receipts, especially non-cash donation receipts including a brief description of the items donated and their value, investment account transaction statements, and unreimbursed business expense receipts. If you are consistent, you can avoid a scramble for misplaced items come tax time.
  4. Review your paycheck. Make sure your employer is properly withholding and reporting retirement account contributions, health insurance payments, charitable payroll deductions and other items. These payroll adjustments can make a big difference on your bottom line. Fixing an error in your paycheck now gets you back on track before it becomes a huge hassle.
  5. Shop for a tax professional early. If you are considering using a tax professional to help you strategize, plan and make financial decisions throughout the year, then search now. You’ll both have more time when neither of you are up against a deadline. Choose a tax professional wisely. You are ultimately responsible for the accuracy of your own return regardless of who prepares it. Ask your friends or colleagues for recommendations, and interview the preparer to insure that their approach aligns with yours.
  6. Prepare to itemize deductions. If your expenses typically fall just below the amount to make itemizing advantageous, a bit of planning to bundle deductions into 2012 may pay off. An early or extra mortgage payment, pre-deadline property tax payments, planned donations or strategically paid medical bills could equal some tax savings. Review the Schedule A instructions or have your 2011 return reviewed by a tax professional to maximize your deductions and prepare an approach that works best for you.
  7. Consider 529 education plan contributions. Utah offers a 5% state income tax credit on contributions up to $1,780/$3,560 per qualified beneficiary for contributions made to the Utah Education Savings Plan depending on your filing status (single/married filing joint). Accounts can be opened by parents or grandparents for the benefit of children or grandchildren. Earnings are tax free when withdrawn for qualified higher education expenses at most colleges and universities both inside and outside Utah. Visit the UESP website at www.uesp.org for specifics of the plan and how to open an account.
  8. Stay Informed. There are many tax laws set to expire at the end of 2012, including many of the Bush-era tax cuts, and several new laws set to take effect in 2013. You can keep up with these changes through the IRS website and other media outlets. As new laws are passed or get close to expiration, you should consider how those changes affect your situation and consult a tax advisor for advice on your particular circumstances.

Savas Greene & Company is an accounting firm specializing in tax planning and preparation for individuals and closely-held business. Please contact us at 801-453-2080 or visit our website at www.gsllc.com.