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12/02/2015

New Tax Year Resolutions

The final countdown to the new year has officially begun, and while many of us are preparing for the “New Year, New Me” resolutions, it is also important to take a look at what can be done differently regarding your financial status and taxes. The key to taxes is to plan ahead and it can be accomplished all year long. You should understand that taxes are based from taxable income rather than your gross income, and this taxable income can be shortened by deductions.

Normally, those of you with many deductions will need to itemize the things that you want to “write-off.” If you don’t have as many, you can use the standard deduction method from the IRS to determine your amount. The goal is to have your taxable income much less than your gross income, and with these tips, you can begin a bright, new future for yourself and your finances.

Individual Retirement Account (IRA)
Any tax professional can tell you that putting money into a traditional retirement plan can serve as a deduction; the best part is that it’s a deduction that doesn’t need to be itemized. The money that goes into a traditional IRA is a pre-tax amount, so it lowers your taxable income either with standard or itemized deductions.

What’s even more amazing is that any contributions made to your IRA up to April 15 can be counted towards your tax return. The only downside is that taxes imposed on your retirement money is deferred rather than completely exempt, which means you’ll have to pay taxes on it at some time, normally during retirement. There are non-traditional IRAs that can prevent having to pay taxes later; your local tax professional should have more information.

Flexible Spending Plans

A flexible spending plan can lower your tax bill with the money you were going to spend anyway on things like medical expenses. Your employer, if they participate in such a program, can take out a pre-set, tax-free amount from your paycheck and place it in an account. Once the expenses have been made, the funds become available.

Putting money into a flexible spending plan will also decrease your gross income, which will decrease your taxable income even more. The catch here is that you have to use the money as intended. For instance, let’s say you put aside money for an adult day care to look after a dependent, but then a close friend of the family offers to watch over that dependent. If your friend isn’t operating a legitimate adult day care service, then the money within the plan is lost.

Each situation can be unique, so be sure to check with an advisor regarding your flexible spending plan.

Give to the Community
One of the most common ways to deduct from taxes is to make a sizable donation to your local charity or nonprofit. You don’t have to necessarily cut a check; you can give items such as toys, household goods, or clothes, which will all need to be itemized. Also, keep in mind that the organization you’re donating to is officially recognized by the IRS.

What you might not already know is that you is that you can also receive a tax deduction for volunteer work. Obviously, you can’t deduct based on time; however, if you had to travel a considerable distance to volunteer, or purchased an item for the organization’s own use, you can deduct those expenses.

“Bundle the Savings”
Ever heard that expression from a salesperson,”bundle the savings?” Each item is marked down, so the more you buy, the more you’re saving. Well, you can do the same with contributions. Let’s say you give a monetary donation to a religious organization every month. At the end of the year, you could match that total amount with a lump-sum gift that would have been next year’s total contributions.

What happens is that you’re basically receiving two years worth of deductions instead of just one. You can do the same with items. For instance, you donate $400 worth of clothing throughout the course of a year. You match that with another $400 worth of clothing, and you’ve completed two years of donating, but will receive the tax benefits all in the same year.

These are only a few examples of the steps you can take to change your financial outcome before tax season. You can even start to use these suggestions before the end of the year. Remember to carefully keep record of you what you plan on deducting; you don’t want to be scrambling around tax season.

However, if you do need more time before you file your tax return, you can quickly and easily e-file a tax extension with ExpressExtension. We offer support for personal tax extensions that can be filled and transmitted directly to the IRS within minutes. Our US-based support team in Rock Hill, South Carolina is committed to assisting you in any way possible with the e-filing process.

We’re available Monday through Friday from 9 a.m. to 6 p.m. EST at (803) 514-5155. We also offer 24/7 email support (support@expressextension.com), and don’t forget to live chat with us on the ExpressExtension website.





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