Good Grief! Time to Start Thinking About Taxes Already?

by Ron Haynes

Time flies! Here we are at the end of the year and for most individuals, it’s the end of the tax year.

A Dutchman was explaining the red, white, and blue of the Netherlands flag to an American. “Our flag is symbolic of our taxes. We get red when we talk about them, white when we get our tax bills, and blue after we pay them.”

The American nodded. “It’s the same in the USA only we see stars too!”

epsilonYep, it’s always wise to think about reducing your tax liability and about taking actions to insure that you’re prepared when tax time comes around. Just as a business’s largest expense is usually labor, my largest expense (and probably yours) is taxes. Just this past year, the US economy spent 30.8 percent of its income on our tax burden (Federal, state, and local), more than food, clothing and housing combined according to The Tax Foundation.

How do I do MY taxes?

I use TaxCut from H&R Block Premium + State + E-File and have for 12 straight years. But this year, I’ll be using the TaxCut Online version. With it, I’ll be able to prepare and e-file both my federal and state return with just one program at the same time! Not only that, but I will also get one “Ask a Tax Adviser” session included and get H&R Block’s “Worry-free Audit Support” by using E-file. Simply put:

I trust TaxCut from H&R Block.

Here’s some year end tax saving strategies I plan to use

1. Review and potentially increase my spending in tax deductible areas.
There would include medical expenses, mortgage interest expenses, interest on student loans, un-reimbursed business expenses, or other related tax deductible expenses. If there’s anything that I can afford to pay in those areas, it makes tax sense to do it before year end.

2. Make a contribution to my Roth IRA.
The beauty of the Roth IRA is, though my contributions are not tax deductible, by making contributions with after tax money, all the growth accumulates tax free (under current laws).

3. Deduct expenses associated with my hobby … blogging.
If you have a hobby that brings in a small income, start treating it as a business. I can come up with considerable losses to offset my very small blogging income. I will treat it and file it as a small business to offset my other income.

4. Make some donations of cash and non-cash items.
We usually donate some cash and some clothing to various charities at this time of year and I see no reason for that to change! We just donated a 5 ft chest freezer to my church and we have a lot of used clothing we can donate to Goodwill. Hey! Every deduction counts!

The easiest way to build real wealth is to keep more of your own money. That means giving the IRS only what it expects when it expects it, and no more. So take some time to organize your finances, to understanding the truth about the IRS and tax deductions, and to know how to protect your assets from over-taxation. It will literally save you thousands of dollars every year and help you maximize your money on the income you are already making.

[tags]blog, charity, taxes, finance, finances, income, money, ira, irs, savings[/tags]

photo credit: chadmiller

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 4 comments }

Feedback Secrets

In regards to tip #4 how you know how to assign a dollar value to non-cash items which you donate. Did both Goodwill and the Church provide you with a receipt or did you estimate their value for taxes purposes?

Thanks,

-Phil.

Alton

In the past, when I’ve made contributions like this, I’ve used what the IRS calls “yard sale value.” Usually there are guidelines that the IRS puts out on what different items are worth, especially clothing items, toys, small engine items (lawnmowers), and electronics. You should be able to find that list on the IRS site.

Joshua

I have used TaxCut for years and very much enjoy the product. I am not sure why but it always comes out cheaper to use them over Intuit’s product. Regardless, TaxCut also has a neat little program that you can get for little to nothing (after rebate) for addressing charitable giving. It is able to give you the acceptable dollar amount from the IRS for your donations ( clothing, cars, etc.) and import the data straight into your Federal form. My only caution here is that the IRS has taken to requiring photographs of goods given to a charity, so beware of that and save yourself a headache….. take a couple of pictures of things before you give them away and attach them to the receipt that you get from the organization.

Gypsie

I really like TaxCut! A couple of years ago, when we were first married, we had an issue with our taxes while using the TaxCut software. So I contacted the nearest H&R Block office. They came in and went over my taxes with a fine toothed comb and the Tax Law book. After about an hour we figured out the problem and they finished our taxes and filed them for us at no additional cost!

PS. Dont forget that the IRS provides a list of free ways to file your taxes if you fall into some qualifying categories;i.e. you make less than x/per year. The website list will return on 16 Jan 09 (http://www.irs.gov/efile/article/0,,id=118986,00.html)

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