With the April 15th deadline behind us, many of us want to forget about Tax Day until next April. This would be a disservice to you. Take the time now to do some planning for the 2013 tax year to capture any potential benefits – or miss out on potential harms to your tax situation.
Of course, if you took advantage of an extension for your 2012 returns, the sooner you file your return, the better so you can start planning for your 2013 tax year.
Here are some things you should be thinking about now – before next April:
1) Make Your Estimated Tax Payments.
If you are self-employed, have a job that does not withhold tax from your paycheck, or have income from other sources (such as certain investments) then you likely have a need to make estimated tax payments. If you anticipate a shortfall in your tax withholding for the year, you need to be making estimated tax payments. One quick check to avoid the underpayment penalty is to ensure by the end of 2013, the smaller of: 90% of the tax you owe for the current year or 100% of the tax shown on the return for last year (2012) is being withheld. If you don’t anticipate this amount to be withheld, then you probably need to make estimated tax payments. Check with your accountant to see if they recommended making estimated payments for the 2013 tax year. Estimated tax payments are due quarterly: April 15, June 15, September 15, and January 15.
2) Fund Your IRA or Roth IRA Account.
Consider making current year (2013) contributions to your retirement accounts now instead of waiting until the filing deadline to contribute. The contribution limits for 2013 are $5,500 to an IRA or Roth IRA and $6,500 if you are over 50. There are certain income limits for contributions that you need to be aware of. Consult with your accountant or other financial professional to see what if an IRA or Roth IRA contribution is appropriate for your 2013 tax situation.
3) Establish Business Retirement Accounts.
If you are self-employed, own your own business, or generate income from consulting, consider establishing retirement accounts for the work you do there. There are several options depending on your situation, including but not limited to: Individual 401(k), SEP IRA, SIMPLE IRA, and Defined Benefit Plans. Ask your accountant or financial professional if you are eligible to establish a retirement account and which one would be prudent for you.
4) Keep Supporting Documents Used For Taxes Organized
If you start gathering paperwork now, you will save lots of time when you are preparing information for your taxes. Get a folder or box to toss receipts, donation records and other tax related documents into throughout the year. Then they are all in one place when it comes time to do your taxes.
5) Create Deductions Before December 31st
Whether you are making deductions for your personal or business, do some planning now versus waiting until December 31st to make donations or generate expenses. If you own your own business or are self-employed, do some business planning now to lay out income and expenses for the year. Same with personal – make cash or non-cash charitable contributions now and throughout the year, instead of rushing to get them down at the end of the year.
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail firstname.lastname@example.org.
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