Wednesday, July 9, 2014

It's time to get into tax-planning mode

Now that we have closed out the first half of the year, it might pay to review your tax filings. Rather than wait for the end of the year, this is the time to get in tax-planning mode.

Did you owe any tax when you filed 2013’s return? Have any problem paying the balance? What did you to not have this happen? Perhaps the following questions should be considered before making any positive plans.

Have there been any changes in your family structure? Did you get married or divorced? Remember, whatever your status is Dec/ 31,you are that for the entire year. Getting a divorce will mean you are going to file as a single person, which carries with it the highest tax rate.

If recently divorced, are you paying child support? These payments are not deductible but may allow dependents to be claimed on your return. Are you the one paying alimony or receiving it? Alimony is deductible by the payer and must be included as income by the recipient.

Getting married also changes the tax bracket you can file under. How about your dependents? Did you have any new additions to the family? Are there any stepchildren who are now part of the family unit? Did you have anyone else become part of the household? All of these items must be considered while planning for the ultimate filing.

If any of these items are going to increase your liability steps should be taken now. Are you a W-2 employee? Then a change in your exemptions can be made with the payroll department .The more exemptions you claim, the less withholding they will take out. Conversely, the opposite is true. Unless you prefer to have a large refund, then by under claiming you are in effect giving the government an interest-free loan.

How about your income? Has that changed also? Any sales of assets that resulted in a gain? Can you take any stock losses to offset that gain?

If you are retired, are you now going to be receiving Social Security along with your retirement income? How about taking a mandatory distribution from an IRA?

Are you self-employed? Has this been a good year so far? Does that trend appear to continue? Or are you having a loss year? Should you be filing estimated taxes?

These are problems that have to be addressed, as you can wind up by paying too little or too much through tax withholding or estimated tax payments. The best way to determine the answers to these and other questions is to seek out a reputable tax professional and get a positive response.
He or she would probably require a review of your prior year’s returns to give sound and competent tax advice. The fee involved would be worth it and the best part is that it would be tax deductible.
Obviously no one can predict the future, especially the work of Congress when it comes to tax legislation. Being an off-year election, would they be willing to pass something to woo voters to their side? Or will legislation occur after the election as a reward or for retribution of their party’s success or failure? They have been known to act on a moment’s notice if need be.

Crackdown on foreign bank accounts

As recently as last week, the IRS has taken punitive action against those who have had foreign bank accounts any time the past 10 years.
Those that have not been reported may face criminal charges in addition to a 25-percent penalty charge on these accounts. This should be of particular interest to those who have immigrated to this country during that period and have not addressed this issue.