March 20, 2012
Quick and (Almost) Painless
Like pulling off a band-aid or returning your mother-in-law’s phone call, sometimes it’s best just to get things over with.
The same goes for your taxes.
So, what are the top things to know this tax season?
“Having a plan will help keep you focused on preventing costly mistakes,” says Jennifer Calandra, co-founder and COO of Calandra Financial Group LLC.
Since unnecessary taxation is common, Calandra advises exploring “tax-sheltered vehicles, [like] deferred annuities.”
Financial experts suggest adjusting your W-4 to withhold less on your paychecks. While larger withholdings create a big tax return, they also give the federal government an interest free loan on your money. The IRS has
a free withholding calculator to help determine your best amount.
Keeping up with legislation changes is key. The new 1099-K form becomes effective this year, recording payments received last year by credit card or through third-party networks like PayPal.
Plus, the top tax rate is on its way to more than 39 percent next year, so some tax specialists advise paying income tax early if you’re in the top tax bracket.
MSN Money’s updated tax return checklist includes helpful tips like how to get adjusted, get itemized and get credit. Plus, the IRS has a step-by-step 1040 personal income tax form series explaining different versions of the form and how to fill them out.
Calandra’s top tip? “Max-out the 401(k) contribution limits of the employer’s plan.” This year, employees can contribute up to $17,000 if they’re under 50 and $22,500 if they’re over 50. “If self-employed, the SEP contribution limit is $50,000."
Bonus PINK Link: Get more tips from “The Tax Lady” Roni Deutch here.
By Julia Turner
“Why does a slight tax increase cost you two hundred dollars and a substantial tax cut save you thirty cents?” Peg Bracken
*Supporting images from FreeDigitalPhotos.net, and Little Pink Book.