Most people have heard of end-of-year tax planning, but there is still a large percentage of Americans who wait until the last minute each filing season to start gathering their forms and setting up meetings with their tax preparer. This procrastination may make for a more enjoyable New Year at first, but it can quickly turn into a stressful experience as April 15 approaches. To help avoid this situation in 2014, it might benefit people to start making some preparations now, before the holiday season begins and the excitement of a new year sets in.
Although people won't have their W-2s or 1099s yet, there is still a significant amount they can get done without this information. For instance, one of the steps that takes up so much time during tax planning is gathering any receipts, invoices and documents that support deductions individuals plan to claim. For instance, those who are writing off medical expenses will need to track down hospital bills, prescription slips and, if travel was involved, hotel invoices and gas receipts. As these individuals will also be required to show that these costs exceeded 7.5 percent of their adjusted gross income for the 2012 tax year, it's important to tally up how much they spent during the year and also make sure that all expenses being claimed qualify under IRS rules.
Life changes should be incorporated into tax planning
Individuals that have undergone big events during the year will also need to take these into account when organizing their taxes. For instance, couples who got married at any point in 2012 will be considered married for the whole year for tax purposes. Therefore, it might be helpful to speak with a tax preparer about whether it would be more advantageous to file jointly or choose the married filing separately option.
Homeowners who have purchased or sold a home will also need to determine how it will impact their taxes. For instance, there are a number of credits or deductions tied to mortgage transactions, but these can be complex. Additionally, those who have home offices and plan to claim the deduction will need to calculate the square footage of the space to determine the correct percentage of utilities, rent and maintenance costs they can write off.
Lastly, those who underwent job changes may need to rethink their W-4 exemptions if they underwent changes in financial or family circumstances. Additionally, individuals may be eligible to write off some of the expenses associated with their job search.
For a more in-depth look at Liberty Tax Service, visit the Give Me Liberty! Magazine. Follow Liberty Tax on Facebook and on Twitter or contact Liberty Tax directly at 1-877-at-Liberty.