Getting Ready for Tax Season
Here are a few tips to help you get ready for tax season:
1. Contribute as much as you can to employer retirement plans. Consider a ROTH IRA or non deductible IRA if you have maxed out other plans. Given the same risk level, money grows faster in a tax-deferred environment compared to one that is taxable.
2. File your tax receipts carefully. If you cannot produce them, you are losing money to taxes.
3. A refund is an interest-free loan to Uncle Sam. Adjust your deductions or estimated tax payments to arrive at a minimal refund.
4. Donate items you no longer need to charity and receive a charitable deduction. Bonus: reducing clutter will clear your mind.
5. Use a good financial software package next year to keep your records organized and accessible.
6. Check your portfolio for tax effectiveness. Mutual funds with a high turnover usually generate higher taxable income, while lower turnover funds produce gains at lower capital gains rates.
7. Save some taxes while helping your kids with a 529 college savings plan. Some states allow a state deduction for contributions.
8. Improve returns by working with your financial advisor. They are able to often see your situation in different context.
9. Don't procrastinate filing your return. Get your records organized now so you have time to prepare your return properly. Haste makes waste.