In between all the holiday festivities this month there’s one more thing you might add to your to-do list – taxes. Before you roll your eyes and move on, consider this – the payoff is worth it. If you can spend just a little time this month organizing your files, getting things in order, and making sure you have all the information you need, you can save money and headaches come tax time.
Why start now? As the end of the year draws near, deadlines are important so you don’t want to miss any important ones.
1. Consider Donations and Deductions
Donations to reputable charities are a great way to share what you have and help give you nice tax relief. You have until December 31 of this year to make any donations you can claim on this year’s taxes, but keep a few pointers in mind. When you donate to a reputable place, pay by check or credit card so you have a good paper trail of the amount you gave. Cash donations are much harder to prove to the IRS, although it’s possible if you get a specific receipt – not just a scribbled note.
If you can’t donate cash, you can give goods. Take a good look around your home and donate things you no longer want, need, or use but are still in good shape. Local charities or larger organizations like the Salvation Army are always happy to take items in good condition they can resell. Itemize each item on a list and snap a few photos of what you are dropping off so you can attach it to the receipt you receive.
And for any donation you make – whether monetary or in goods – make sure you get a receipt to keep with your tax records. If you are ever audited, the IRS will want to see those receipts.
2. Pay Help Legally
If you have a regular sitter, nanny, housekeeper, or other type of caregiver, you are responsible for paying taxes for them if they meet certain requirements. If you pay someone $1,900 or more in a calendar year and they perform duties for you according to your specifications, you are considered their legal employer. This group doesn’t include a company that is independently owned (like Merry Maids or your local lawn care company), but probably would include your neighbor who watches your kids for 18 hours a week or the caregiver who takes care of your mom 3 days a week.
If you neglect to pay legally, you are potentially opening yourself up to charges of tax fraud and hefty fines, penalties, and back taxes. Setting up a household employer system is a little time consuming at first, but it’s your legal responsibility. If you are unsure how to do it, hire a firm experienced in household tax help.
3. Use Flexible Spending Accounts
It’s not to late to use up any of the funds you might have in your FSA, but you have to get busy. Most of the time, you have to use the funds in the account by the end of the year, but check with your employer because each has individual requirements and deadlines. With that in mind, set up any last-minute appointments for dental work for anyone in your family, see if you can get that full-body skin check at the dermatologist or order any specific skin treatments you need, or even order spare glasses or your next supply of contact lenses now. If you know you are having that root canal in January or February, see if you can pay ahead for some of it before the end of the year if necessary.
Always keep in mind that keeping up with tax issues will very likely save you money in the long run. Take stock now – you still have some time left this year to make a small effort for a big reward.