|
|
|
|
|
5 Easy Steps to Help Prepare for Tax Time
|
It's panic time! Many of us have started searching through old files to prepare our taxes.
To help you get started, we've provided 5 easy steps.
Tax Tip 1: Organize
Make sure you have complete and accurate information including:
· a W-2 form from your employer
· any 1099s to report self-employment income, interest income or dividend income
· documentation for rental income if applicable
· deductions such as alimony payments, IRA contributions, real estate taxes, or charitable donations
· Form 1098, the Mortgage Interest Statement sent by your mortgage lender
More Information:
· Help measure the impact of possible deductions with this easy reference.
· Use this fast link to all federal and state tax forms.
Tax Tip 2: Maximize Your Retirement Plan Contributions
If you're participating in an employer-sponsored retirement plan like a 401(k), you may be able to contribute up to $14,000 in 2005. Plus, if you're over age 50, you may be allowed to contribute an additional $4,000 if the plan allows. Your contribution grows tax-deferred until retirement, and the effect on your paycheck can be surprisingly painless.
Tax Tip 3: Stop Loaning Money at 0%
A refund from Uncle Sam may seem like a bonus…but you are actually getting your own money back! That means you were lending the government money interest-free. If you got a tax refund last year, you may want to consider decreasing your withholding and put that money to work for you. Find out how much you should withhold, and update your W-4 form.
Tax Tip 4: Leverage the Power of an IRA
See if you can lower your 2004 tax liability by contributing extra to an IRA. If you're eligible for a federal tax deduction of your IRA contribution, for every $1,000 you contribute, you lower your federal taxes by $250 (if you're in the 25% tax bracket). The maximum catch up contribution on an IRA rises to $4,500 in 2005 for those over age 50. The impact on your retirement can be significant. (Contact your tax advisor for more details.)
Tax Tip 5: Take Advantage of this New Tax Law
A new law became effective last fall allowing you to deduct state sales tax from your federal taxes instead of state income tax if you itemize your deductions. If you live in a state with no state income tax, this is to your advantage. And if you made a major purchase in 2004, such as a car, boat or other big-ticket item, explore this new law with your tax advisor.
More 2004 changes to tax laws that may affect you.
|
|
|
Click On Banner For More Information
|
