NEW YORK (MainStreet) -- Happy New Year! As I say at this time each year – now is the time for all good taxpayers to come to the aid of their 2012 tax return.
You read it right – I said their 2012 tax return.
If you want to make 2012 “less taxing” it is important that you start the year off right.
The first step is to resolve to become more informed on federal and state income tax laws. You cannot know the right moves to make in your daily financial life without a basic knowledge of the tax implications of your actions.
Learn what you can, and cannot, deduct on your tax return, including the special items that are unique to your trade or profession, and the rules governing any special situations that apply to you, and keep up to date on federal and state tax law changes. Even if you use a professional to prepare your return, the more informed you are on tax matters, the more prepared you will be when you go to your annual tax appointment. A good way to stay up to date on tax law changes is to check the Internal Revenue Service website every so often (www.irs.gov) or to bookmark our tax section. Every week until Tax Day, I’ll be updating you with tips on deductions and tax breaks.
Next, set up a good system for maintaining tax records and receipts, whether you use an accordion file or hanging folders. Some deductions require special recordkeeping or additional information, such as business meals and entertainment, business use of "listed property" such as cars and computers, gambling losses and charitable donations.
And, if you are financially able to do so, be sure to contribute the maximum amount to your employer's 401(k), 403(b) or 457 pension plan. For 2012 the maximum you can contribute is $17,000 – plus an additional $5,500 if you will be age 50 or older at the end of the year. Contributions to these plans will reduce your federal, and often state, taxable wages and therefore reduce your Adjusted Gross Income.
Stay up-to-date on federal taxes by paying a regular visit to MainStreet’s Tax Center.