| As soon as March rolls around, many of us get ready | | | | out on taxes during the filing time. |
| to welcome the Spring season but many worry about | | | | 1. If you are an employee, you can avoid paying at the |
| the Tax season. I am sure you are among millions of | | | | end of the year by increasing your tax withholding. It |
| people trying to get your tax return filled and filed | | | | actually changes the mind set from "how much need |
| away by Apr 15. Many of you might use your good | | | | to pay" to "how much I will get back as refund". But |
| Internet skills and take advantage of on-line tools like | | | | the problem is, more money will be taken out of your |
| Turbo Tax or TaxAct to file taxes. Others still don't | | | | paycheck throughout the year and you need adjust |
| believe the on-line tools does good job in getting you | | | | your budget accordingly. That may sound like a good |
| big tax refund and still depend on CPA's and tax | | | | strategy but at the same time you don't want to give |
| preparers for tax help. | | | | away Uncle Sam interest free money by withholding |
| Either way, you will only get what you can get and you | | | | too much. A nice realm check is to use this year's |
| cannot change anything now at this point to get more | | | | return and keep the all deductions constant and see |
| tax refunds than eligible. Some don't understand, it is | | | | whether you withholding is right level. If you got too |
| too late to think about getting more tax deductions | | | | much refund reduce the withholding proportionately, on |
| unless you planned in advance. You can only reduce | | | | the other hand if you paid tax, increase your |
| taxes so much by either by taking deductions or using | | | | withholding accordingly. |
| credits. That's where Tax planning comes into play a | | | | 2. If you have a stock which you been waiting for |
| key role. | | | | years to bounce back up but never seen any signs, |
| Tax planning is many times confused with tax | | | | don't lose heart. That loser stock can still bring you |
| preparation, with only thought given to planning when | | | | money by reducing your tax burden. Just wait till the |
| preparing their annual tax return. However, little can be | | | | end of year and sell it if you don't see the sunlight for |
| done to actually reduce your tax bill at that point. If | | | | the stock. Buy selling the loser stock for loss, it helps to |
| your aim is to reduce taxes, you need to be aware of | | | | balance out the capital gains for that year, plus allows |
| tax planning opportunities throughout the year. | | | | to take another $3,000 deduction (married filed jointly) |
| Take time in the early part of year, may be during tax | | | | in regular income. But there is a caveat to it. You need |
| preparation process, to assess your tax situation, and | | | | to avoid wash sale. You cannot just sell the loser |
| look for ways to lower your tax bill. Consider a list of | | | | stock and buy the same stock with before or after 30 |
| items, such as what kinds of debt you owe, which | | | | days of the sale. Then the losses you realized |
| investments you own and need to dispose, how you | | | | previously gets disallowed. |
| are saving for retirement and kids education expenses | | | | 3. If you are expecting big medical expenses for that |
| and what tax-deductible expenses you incur. Also | | | | calendar year, you should be able to itemize the |
| deciding whether you want to file separately or jointly, | | | | deduction by keeping track of the transactions and |
| timing the sale of your capital assets, deciding on | | | | even medical miles driven. In order to do that, you need |
| period of withdrawal of retirement funds, the timing and | | | | to plan and remember to save all the receipts of the |
| amounts of giving gifts and when to pay expenses | | | | expenses like hospital charges, co pays, |
| are some examples of tax planning. | | | | medicines&prescription cost and much more. Track the |
| By thinking about tax consequences during the year on | | | | medical miles driven and also add them in the |
| every big financial moves will prevent you from finding | | | | deduction. Add these medical deductions on top of the |
| out later that there was a better way to handle every | | | | health insurance paid from your pocket. |
| transaction. | | | | These are just few samples and there are lot more |
| Here are few examples of tax planning which might | | | | too tax planning. Will cover some more in the other |
| help you either to get better refunds or avoid shelling | | | | article. |