April 15th will be here before you know it, and clients usually ask us about some last-minute tax tips to minimize their tax bills. As a result, here are a few of our favorite strategies to save you time, money, and mental stress.
1. Get Some Credit for Retirement
Most young professionals are aware of tax benefits for investing money in a 401k account—your dollars are invested pre-tax, and income taxes are deferred until the money is withdrawn at retirement. However, another tax credit exists which particularly helps younger workers with low to moderate incomes save more for retirement. It's called the Retirement Savings Contribution Credit and can be worth up to $1,000 depending upon your adjusted gross income (AGI). And don't forget, you can continue contributing to your 2007 Roth Individual Retirement Account (IRA) through April 15, 2008.
2. Make it Virtual
Consider filing your taxes online this year. The Internal Revenue Service (IRS) is extending its free E-file system of federal tax returns for individuals with an AGI less than $54,000. Not only will you save money on filing fees, but your tax refund generally arrives faster and the likelihood of filing errors is reduced.
3. Give Thanks, Get a Deduction
Even though you must itemize your taxes to get this one, the tax benefit could be worth it. Contributions of cash and property are deductible if they are made to "qualified organizations" as defined by the IRS. If you contributed more than $250 to any single organization, be sure to ask for a receipt, and when valuing property, you can deduct the "fair market value" of the item at the time of its donation.
4. Recognize Your Small Business
You may not realize it, but you might be a business owner. In 2007, did you receive side income as a computer repair expert, freelance writer, web designer or independent consultant? If so, be sure to deduct all expenses directly related to your operations, marketing, professional services fees…even pens and pencils. These are all qualified business expenses and should be written off.
5. Plan the Entire Year
As financial advisors, our clients regularly bring in piles of tax documents in January and February but rarely pay any attention to tax considerations in August in September. Remember, tax planning is a year-round endeavor and requires your strategic attention during all twelve months of the year. Keep proper ongoing tax records, maintain a special location for stashing your receipts, and throughout the entire year, be sure to clearly document all transactions that will have a tax effect.
1. Get Some Credit for Retirement
Most young professionals are aware of tax benefits for investing money in a 401k account—your dollars are invested pre-tax, and income taxes are deferred until the money is withdrawn at retirement. However, another tax credit exists which particularly helps younger workers with low to moderate incomes save more for retirement. It's called the Retirement Savings Contribution Credit and can be worth up to $1,000 depending upon your adjusted gross income (AGI). And don't forget, you can continue contributing to your 2007 Roth Individual Retirement Account (IRA) through April 15, 2008.
2. Make it Virtual
Consider filing your taxes online this year. The Internal Revenue Service (IRS) is extending its free E-file system of federal tax returns for individuals with an AGI less than $54,000. Not only will you save money on filing fees, but your tax refund generally arrives faster and the likelihood of filing errors is reduced.
3. Give Thanks, Get a Deduction
Even though you must itemize your taxes to get this one, the tax benefit could be worth it. Contributions of cash and property are deductible if they are made to "qualified organizations" as defined by the IRS. If you contributed more than $250 to any single organization, be sure to ask for a receipt, and when valuing property, you can deduct the "fair market value" of the item at the time of its donation.
4. Recognize Your Small Business
You may not realize it, but you might be a business owner. In 2007, did you receive side income as a computer repair expert, freelance writer, web designer or independent consultant? If so, be sure to deduct all expenses directly related to your operations, marketing, professional services fees…even pens and pencils. These are all qualified business expenses and should be written off.
5. Plan the Entire Year
As financial advisors, our clients regularly bring in piles of tax documents in January and February but rarely pay any attention to tax considerations in August in September. Remember, tax planning is a year-round endeavor and requires your strategic attention during all twelve months of the year. Keep proper ongoing tax records, maintain a special location for stashing your receipts, and throughout the entire year, be sure to clearly document all transactions that will have a tax effect.
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