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IRS Tips to Use before the End of the Year

October 14, 2014  |   Tax Tips   |   Tags: , ,  

Most taxpayers rarely think about their taxes until tax season is here. However, financially savvy Americans remember that good tax planning is something to work on throughout the year. After all, April 15th is not Christmas and the IRS is not Santa Claus working just during the busy season. As the cool Autumn temperatures are flirting with even the country’s southern-most states, it may seem that most opportunities for successful tax planning are lost. However, there are actually plenty of IRS tax tips taxpayers can follow at the end of the year.

irs tax tipsDeferring the last invoice of the year to the next one or asking the boss to wait to hand over that Christmas bonus until January are things taxpayers may want to consider to save on their next return. After all, the more money someone makes in 2014, the more money he or she will owe the IRS on the 2014 income tax return. However, an important thing to keep in mind is that this will be seen as income for 2015. It is important to consider whether this technique is being used at a time when saving a little extra money will go a long way, or whether this is simply putting off an expense one year after the next. For instance, someone getting married or expecting a new baby during tax season ultimately needs those savings more than he or she will during the next tax season.

Taxpayers with a retirement account may find that maxing out their allowable retirement contributions with the Christmas bonus is actually a more financially lucrative maneuver. Others may choose to make that surge of holiday income a possible tax deduction instead of a liability, by donating it to their favorite charity. However, it is important to make sure that the IRS views the charity as legitimate, keep documentation of every contribution, and itemize it all correctly on their 1040. They may also want to look at the IRS tips on charitable donations while they are feeling generous to make sure that they are maximizing the benefits of charity.

While helping others is certainly an altruistic endeavor and can be quite rewarding, there are also deductions taxpayers can claim for making their own lives better. For instance, anyone interested in home improvement and saving money on energy expenses should keep the Residential Energy Efficiency Tax Credit in mind. Something as simple as adding insulation could save a taxpayer good money come tax season. Those who are going to college may qualify for a $2,500 credit with the American Opportunity Tax Credit. Taxpayers wishing to take advantage of this credit should consider paying for the upcoming Spring Semester before December is over.

These are only a handful of breaks available to taxpayers. To make the most of these and to explore other tax saving tips, it is often in one’s best interest to talk with a reputable tax professional. There are sometimes many golden opportunities that a tax professional can easily recognize, but that taxpayers have overlooked for years.