April 1st, 2011
Taxes Throughout the Year
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** It’s Credit Karma Tax Week! Every day we’ll have tax-related posts to keep you in-the-know as you file your taxes. **
Congrats! You’ve just filed your 2010 taxes; now what?
How about making next year’s taxes easier? Here are ten easy steps to make sure that come Tax Day 2012, you’re ready for the taxman.
- Adjust your withholdings. If you get a raise this year, make sure you’ve worked things out with your employer to adjust your W-4, and get extra help from this IRS resource on how to adjust tax withholdings.
- Keep good records, especially if you’re self-employed. We like what LinseyKnerl from FinancialHighway.com said in our tax tips blog: “Don’t wait until the end of the year to get organized.” Organizing your receipts and bills at the end of each month is a smart step towards being far more prepared by next Tax day.
- Start thinking ahead. Are you getting married this year? Buying a home? As you go through these life changes, consider how they will affect your tax filing. Make sure you take the steps to be prepared, like changing your name with the Social Security Administration or changing your address with the IRS.
- Build an emergency fund. Just in case you’re hit with an unexpected tax bill next year, be ready to pay it off in full, without worrying about paying interest on installments or penalties on late payments.
- Donate to charity. Megan Tice from the Money Aisle blog suggested, “Start your spring cleaning early and deduct charitable donations.” Keep track of your donations just in case the charity neglects to send you a report of what you’ve donated at the end of the year.
- Make a separate file for your 2010 tax return. Remember, you’ll want to be able to find it for reference next year, so create a specific file for tax returns and put the previous year’s return there. If you’ve lost any documentation, the IRS has copies you can request.
- Start saving for retirement. A way to lower your taxable income is to contribute to a retirement plan. If you open either a 401(k) or a Traditional IRA, your contributions will be tax-deductible and tax-deferred, meaning you won’t be charged income taxes until you take your contributions out at retirement. Read more about which plan might be right for you.
- Go back to school. Take a cooking class at a community college. Sign up to learn Italian. Even when you’ve graduated from college, you may be eligible for higher education tax credits. Check Publication 970 to see it you’ll qualify.
- Keep records of your investments, including when you purchased them, interest and dividends earned on them, and when you sold them.
- Educate yourself! If you have specific tax questions, the IRS has some great resources on its website.
Whew! You’re a few steps closer to being ready on Tax Day 2012. Now, sit back, relax, and read about some smart ways to spend your tax refund.
Disclaimer: The answers given here should not be construed as tax or legal advice. They should be taken as tips only to be acted upon at further investigation and research on the reader’s part.