Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
I’ve compiled a few tax planning tips and strategies, as well as a few fun things, for you to think about as we enter December – and your year-end tax planning season.
- Do You Have A Medical Flexible Savings Account: What’s your balance? Don’t waste it. Think about medical treatments & medications you can pay with this money. The new health care law limits what is eligible as well as the amount you can contribute. IRS Pub 502.
- Child (or family member) in college?
- Open a NY State 529 plan today. You are allowed a contribution of up to $5,000 from each parent for the year.
- As soon as your check clears, make a withdrawal from the plan.
- Get an extra $800 to $1,000 tax reduction on your 2012 NY State tax return.
- Repeat every year your child is in college.
- RMD: Don’t forget to take your IRA Required Minimum distribution from your traditional IRAs, simplified employee pension (SEP), and SIMPLE-IRAs. (Remind your parents!)
- Sell any investments (in a non-tax sheltered account, like an IRA) on which you have a gain this year and take advantage of the zero percent long-term capital gains tax rate if you’re in the 10 percent or 15 percent tax bracket, or a 15 percent tax rate for higher tax brackets.
- Call Your Tax Preparer THIS WEEK to Determine Your Estimated Tax Liability for this year: Receive a state tax deduction in 2012 by paying your final state estimated tax installment in December instead of January. Set up your on-line account with IRS: www.EFTPS.com, and in New York and New Jersey.
- Do you itemize? Consider paying these expenses before December 31:
- Real estate taxes are due by Jan. 1, but pay them by Dec. 31.
- January mortgage payment to deduct the interest this year.
- Charitable contributions. Check out IRS publications 526 and 561. Check the status of the charity.
- Doctors, dentist, and other medical.
- Miscellaneous Expenses: like investment-related material, dues, business expenses, and tax preparation fees must exceed 2 percent of your adjusted gross income. Pay these now to meet that deduction threshold.
- Casualty Losses, like from Sandy. Call your tax preparer to discuss your tax write-off.
- Self-employed? Considering a Keogh retirement plan? It must be established by the end of the year to ensure that contributions for the 2012 tax year are deductible. Also, maximize your 401(k) or 403(b) plan contribution.
- Watch your Wallet. Remember, the IRS does NOT email you. Also, do not reply to emails asking for your account number, password, etc. If in doubt, call the bank, or the credit card company USING A NUMBER YOU GET FROM THE PHONE BOOK, or on a prior bill you have – not the one provided in the email. If you are still not sure, call a family member, your tax preparer, attorney, or local congressman.
- Holiday Gift Suggestions:
- December 8: Chanukah begins Saturday evening. May the lights of this Holiday bring peace and understanding. December 25: Christmas: HOHOHO! Track Santa beginning December 1 at http://www.noradsanta.org and have a Happy New Year.
- Think about tax simplification: Make your congressmen prepare their own tax returns!
- Remember: The difference between tax planning and tax preparation is THE DATE.
- Tax planning must occur BEFORE the year ends.
- Tax preparation begins AFTER January 1.
- There is still a little time.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.