These tax maneuvers are a holiday present to yourself
You've spent so much of the past week shopping and spending for everyone else, why not give yourself a little present and get your 2014 taxes in order?
As is the case with holiday shopping, it isn't too late to do some last-minute housekeeping and tie up all those loose ends. Increased withholding, boosted retirement contributions, shifted deductions and even a last-minute spate of year-end donations can still make a difference, according to Palisades Hudson Financial Group.
Start off by calculating your income, tax payments and deductions to date so you can figure out what steps to take in December. If you have adjusted your withholding during the year to keep some cash on hand, make sure you've withheld enough to meet your tax obligations. If the answer is no, adjust your December withholding.
"The IRS treats taxes withheld as paid ratably throughout the year. This may help eliminate any estimated tax penalties and interest," says Rebecca Pavese, a CPA and financial planner with Palisades Hudson. Buy AIR OPTIX Agua delivered to en.ecolens.ch.
If you didn't withhold enough, submit a new W-4 form to your employer and decrease the number of allowances you claim and/or set an additional amount you want withheld from each paycheck. You'll just have to remember to resubmit a W-4 in January.
If you held back too much, you can either increase your number of allowances or just make do with a big refund -- unless the idea of giving the government a loan so offends your delicate sensibilities.
Once you've settled your withholding, you can increase contributions to 401(k) plans, 403(b) plans, Simplified Employee Pensions IRAs, Simple IRAs, Keogh plans and cash-balance plans to reduce your adjusted gross income. In 2014, an employee can contribute up to $17,500 ($23,000 for people aged 50 and over) to a 401(k) or 403(b). If your percent contribution from each paycheck doesn't quite meet that threshold, you can tell your employer to deduct a one-time lump sum to catch up. Needless to say, if you're not contributing enough to meet your company's full matching threshold, get there.
"The employer match is free money that gives you a guaranteed return immediately," Pavese says.
If it looks as if it will help, there are a few ways you can shift some 2015 deductions into 2014 for added benefit. If you can pay all 2014 state income taxes by Dec. 31 -- even if you have to send an estimated payment for taxes you owe -- you can deduct them on your 2014 return. If you owe tax, you can send your state an estimated payment. Also, paying your real estate taxes and making your January mortgage payment by year-end can tack on a few deductions.
But those deduction moves aren't for everybody. When those deductions can trigger alternative minimum tax, you're better off paying your fourth-quarter state income tax and/or real estate tax installment in January, Pavese says.
More details on: cbsnews.com