3 Easy Tax Tips for December

3 Easy Tax Tips for December

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.

Making Tax Season a Little Easier

Making Tax Season a Little Easier

It’s the time of year that makes even the most organized people cringe – tax time. Unless you are an accountant who knows all the ins and outs of taxes, this time of year can be confusing. But a combination of getting things done early and finding some hidden money might make the process a little less troublesome!

Be on Time

Really, filing on time is one of the most important things you can do at tax time (well, that and being accurate!). You don’t want to have the hassle of filing for an extension and then feeling forever behind the eight ball. And if something looks wrong, you have time to fix it without a looming deadline. Set aside blocks of time to make it easier – one block for gathering your papers, one for a first run at it, a dedicated time for focused proofreading, and then the final organizing before it gets filed or sent. Even if you have someone else do it for you, you still have to take the time to gather all the papers and records you need. The earlier you get that done, the better.

Find the Money

If you have dependents like children at home or even an elderly parent you care for, you might be entitled to take advantage of the child and dependent tax credit. The credit can amount to thousands of dollars of tax savings. The credit includes traditional day care and childcare, but also can even cover summer day camps as long as it is something that is caring for your kids to give you time to work. If your employer offers a flexible spending account and you are signed up, you can also use that to get a tax credit if you used it to pay for the care or expenses of a dependent.

Charity Credits

Charity credits can raise a red flag with the IRS, but if you keep meticulous records, you shouldn’t have a problem if you are ever audited. You can deduct expenses for things like donations you make to the Salvation Army or other legitimate charitable organizations. So you think that 5-year-old blazer isn’t worth mentioning? If you donate a large pile of good-quality clothes, a few bags of kids’ books and toys, and various household goods throughout the year, your donations could easily add up to hundreds of dollars in charitable deductions you can claim. To make sure you are covered, keep very specific records. List every item you donated, take a photo of what you donated, and don’t forget to get a receipt (you have to have this). Attach all your photos and documents and keep them in a file marked “donations.”

Make Sure Everything Is Legal

If you employ a housekeeper, gardener, or even a sitter and pay him or her $1900 or more in a year, you are most likely, in the eyes of the IRS, a household employer. If so, you need to be paying the taxes of your employee and if you haven’t done that yet, it’s not too late to get going. You should probably consult with an accountant familiar with both tax and labor laws to make sure it is all done by the book. If you choose not to, you are taking a risk that carries hefty fines and penalties.

When you are ready, file your return and give yourself a pat on the back for another (big) chore completed.