As the holiday season approaches, many people get caught up in making travel plans, purchasing gifts and hosting events. However, this can leave little time for individuals to organize their finances and start the new year on the right foot. People who know where they currently stand may be better equipped to plan ahead for their 2013 goals. This in turn may enable them to boost their savings, develop a stronger investment portfolio and lower their tax liability.
Individuals should take advantage of the calm before the holidays to review their standing and consider a few year-end changes that may boost their position for next year. For example, those who have not contributed the maximum amount to a retirement fund - such as a 401(k) or 403(b) - have until December 31 to do so. The rules differ slightly for IRAs, as individuals can make contributions for 2012 until the due date of their returns - in most cases, April 15. In addition to boosting their retirement funds, making maximum contributions may also lower workers' tax liability for the 2012 tax year. Those 50 and older should also take advantage of "catch-up" contribution allowances, which enable them to put an additional $5,500 toward their retirement accounts each year.
The end of the year is also a good time to contribute to charities and meaningful causes. Those who give money or assets to qualifying organizations may write these costs off on their taxes if they itemize their deductions. However, it's important that people ensure the organization to which they donate is a qualifying charity or cause in order for the write-off to be valid. The Internal Revenue Service typically classifies organizations as "qualifying" if they are organized and operated for religious, charitable, educational, scientific or literary purposes. Those that operate for the prevention of cruelty to animals or children are also valid. Those who have questions about where a group qualifies under these rules should consult their tax preparer
Preparing for the long-term
In addition to maxing out retirement contributions, those who invest heavily in the stock market tend to use the end of the year for tax-loss harvesting. This process involves selling securities at a loss to offset capital gains tax liability. Prior to doing so, however, it may be ideal for investors to consult with their advisor to ensure this strategy will help them in the long run.
Finally, individuals should take any life changes into account to update their legal documents. This includes marriage, divorce, death and birth, all of which may prompt changes in a person's beneficiary information.
Liberty Tax Service (NASDAQ: TAX) has prepared over 2 million tax returns in 2012 alone and has over 4,100 offices in the United States and Canada. As the fastest growing tax franchise ever, Liberty Tax’s total revenues grew to $109.1 million last tax season. Liberty Tax stands behinds community enrichment efforts by sponsoring various non-profit organizations and urging their employees and franchisees to give back to their communities.
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