7 Steps to Get Ready for the 2012 Tax Return
By Joseph Smith, EA, MTax, contributor
A new year is just around the corner, and by the time you read this article we will have roughly two months before the end of the year. That means another tax filing season is rapidly approaching. Here are seven things you can do to get ready for your next tax return and avoid additional stress at the last minute.
1) Make sure everybody has your correct address
Travelers have a tendency to change addresses or accumulate forwarding addresses during the course of their career. A number of tax documents will be sent by mail at the first of the year. Make sure everyone has the right address: banks, former employers, brokerage firms, etc. If possible, have these documents electronically delivered.
2) Gather and sort your receipts now
It’s astonishing how we can leave bits and pieces of paper scattered throughout our homes, cars and backpacks. Spend some time now getting these in one place so you are not frantically searching when you are ready to file your tax return.
3) Review your withholding while there’s time to make additional tax payments
Since travelers can have varying pay rates from assignment to assignment, it is possible that the withholding is not adequate for the total amount of income earned during the year. Have your tax professional look at your current year-to-date pay stubs and ensure that you are up to date on your tax payments.
4) Locate your 2011 tax return so you can present this to your tax preparer
If you intend to use a new preparer this year, they will most likely ask for a copy of last year’s return. This not only demonstrates the tax professional’s desire to look at your entire situation, but your previous tax returns contain critical data that may be required for the current return.
5) Consider the amount you wish to contribute to your retirement accounts
A taxpayer has until April 15 of next year (the due date of the return) to contribute amounts to his or her retirement accounts that apply to the year of filing. If you intend to maximize your contributions, you may want to begin saving up for that contribution instead of scrambling to find the funds before the deadline.
6) Make those final tax-deductible, charitable contributions now
Just like the IRA contribution, you don’t want to wait until the last minute. You’ll need to have the funds available before December 31 if you intend to benefit from the tax deduction for charitable contributions.
7) Bunch up any discretionary expenses that are tax deductible
If you have a large amount of medical expenses that need to be paid, it is better to pay them all in one year instead of spreading them through multiple years especially as we head into 2013. Currently, medical expense deductions are limited to the amount paid for medical expenses that exceed 7 ½% of your gross income. In 2013, this increases to 10%. For someone making $50,000 a year, this reduces their eligible expenditures by $1,250 if they wait till 2013.
Finally, this may be one of the most chaotic tax filing seasons ever. You have probably heard lots of talk about a fiscal cliff and the need to deal with expiring tax laws. Since Congress is unlikely to do anything until the elections, this may create problems for the IRS processing of tax returns in 2013. So do what you can to be prepared before the tax filing deadline, and keep a lookout for new developments.
About the author:
Joseph Smith is an IRS Enrolled Agent (EA) and former travel respiratory therapist whose firm, TravelTax, provides tax preparation and audit representation for the mobile professional.
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