Top Ten Things To Do During Tax Season (Apologies to David Letterman)

10. Get your things organized and to your preparer as soon possible to avoid needing to file an extension.

9. If you owe a lot or are getting a big refund, adjust your withholdings or quarterly estimated payments now.

8. If you can deduct an IRA contribution and owe tax, consider making a contribution before April 15 and getting it on your 2010 tax return.

7. If you live in Colorado, have kids in college, and don’t have a Colorado 529 plan, set one up and put this year’s tuition in it now.

6. Start your file now for 2011 tax data.

5. If you’re going through a divorce…oh shoot, taxes are the least of your problems.

4. Start a mileage log with a section for charitable miles, medical miles, and business miles.

3. Keep track of all your out of pocket business expenses.

2. Keep organized on your other financial issues, not just taxes.

1. Reward your tax preparer with chocolate – especially if it’s me!

Advertisements

Tax Refunds

You may think that income taxes are something people think about between January 1 and April 15 of every year.  Or maybe you think if people are really good planners, they think about taxes during December before “tax season” starts.  But this is one of the best times of years to think about your income taxes. 

 

First, realize that it’s generally not good to get a big refund.  The IRS doesn’t pay interest on money it’s been holding on to for you, so when you get a big refund check, that money wasn’t earning anything for you while it was waiting for you to claim it.  Most of us would rather have a better return on our investment than that. 

 

Second, there are times when having a big tax bill can be ok.  If you pay into the IRS what you owed last year (or slightly more if you’re in the higher income brackets) you can generally pay what you owe by April 15 and not be out any interest or penalties.  So even if you’re keeping the money in a savings account, you’ll probably come out ahead.

 

A real key is realizing that what you owe doesn’t have to be a surprise!  A good tax professional can look at what your taxes looked like last year, what you’ve got on your financial plate this year, and then give you some idea of what your tax return might like for the year.  They can even generate a W-4 to adjust your paycheck withholdings up or down, or give you some estimated tax calculations and forms to send in.  What they charge you could save you in penalties or give you some extra cash flow now to invest. 

 

This is the perfect time of year to plan for your taxes.  You’ve still got time to do something about it and avoid a surprise next year.  And, your tax preparers would love to see you.  They get lonely this time of year.