Although it seems that next year is a long ways off, it’s already May and we’ve already experienced four months. And if you were like a lot of our clients, you didn’t have your tax information easily at hand for your 2010 tax return, having to make a mad dash at tax time trying to find everything you need for your return.
Well, hopefully this blog can get you headed in the right direction so that come early next year, you will not only have everything ready for your return, you can face the amount owed or expected to be refunded, with a sense of confidence rather than dread or surprise.
Let’s take a look at some of the things you can do right now to get yourself organized and prepared.
1.Use the IRS Withholding Calculator:
The majority of our clients are W-2 employees and most of them have held the same position and made roughly the same amount of money each year. Yet, without fail, quite a number of them are surprised at either the amount owed or lack of refund. They often say that they thought because of such and such deduction they didn’t have to withhold as much. This mentality is no different than gambling, because they never actually know what the consequences of their changes mean.
This doesn’t have to be the case. All you have to do is grab your most recent pay stub and go to the IRS Withholding Calculator website. Just follow the prompts and it will easily allow you calculate with confidence how best to set up your W-4 so that you owe as little as possible. Or receive a refund as large as possible. It all depends on your preference.
2. Begin Tracking Your Expenses NOW:
There are a number of terrific reasons why spending time now logging deductible expenses will help you in the long run, besides the fact that it will keep your tax preparer from pulling out all of her or his hair when you bring in that old shoe box again.
First of all, your memory is not nearly as fool proof as you think. We have plenty of clients who draw a blank when we ask for specific numbers, or seriously overestimate what they think they had when they go and tally everything up.
A great idea is to at least start separating your receipts into their different categories. So for medical expenses, put all your medical bills in one spot; your automobile expenses, put them in another spot, etc. And to make sure you don’t unnecessarily keep things you don’t need, talk to your tax advisor and have them help you determine what would help you out based on your previous returns.
3. Get Caught Up On New Tax Laws:
There are plenty of terrific tax resources available online that can keep you up to date on current and forthcoming tax legislation, including, of course, this blog. Keeping up to date will help to keep you from being caught flat footed when the credit or deduction you had been expecting is no longer available.
An example of this issue was a couple years ago the child tax care credit for California dropped from around $300 to only $90 per child. Well, this left some mothers a little shocked to discover that they weren’t getting the usual refund from the state that they had become accustomed to. Now while there wasn’t anything they could have done to change the law, they could have had themselves more prepared for this eventuality.
It will be 2012 before you know it. Now is the time to get ready for your 2011 return as it will save you heartache, put you on more stable ground financially and give you peace of mind when you go to get your tax return done, knowing that you already have a very good idea of what to expect.