The tax extension deadline is almost here and this is a friendly reminder that the IRS wants your tax filings soon. This year the tax deadline, for those taxpayers that filed for a 2012 tax extension back in April, is October 15.
If you didn’t know, the IRS allows taxpayers to file an automatic six month extension. You can use the extra time to get all your paperwork in order. It also gives procrastinators some extra time to avoid the work.
However, this extension is only for the paperwork. Any taxes owed had to be paid back at the April deadline. You needed to estimate and pay your taxes back then to avoid any penalties and interest.
If you filed for an extension this year, here’s a few helpful reminders and tax tips before filing your return:
- Double check your information
- Don’t overlook any credits or deductions
- Review the cost basis changes before reporting investment profit (or loss)
- I use and recommend TurboTax every year
To qualify for an extension next year, you can fill out IRS Form 4868. You can eFile it or print out the form and mail it in.
Prep For 2013 Tax Year
With that reminder over, here’s another one – we’ve got about three months left till the end of the year. While there’s never a good time to think about taxes, it still needs to be done.
You should have your tax bracket locked down by now. That should make it easier to focus on lowering your tax obligations. A great place to start is with your retirement plan.
Your 401k
That 401k through work is an easy opportunity to lower your taxes and save for retirement at the same time. Income you put into your 401k is tax deferred, meaning you don’t pay taxes on it now. And I have yet to hear anyone say they saved too much for retirement this year. If you haven’t hit the 401k contribution limits yet, now is the time to try. Even a small increase these last few months of year will help.
Don’t wait till the last minute either. The deadline for most 401k contributions is the end of the calendar year, Dec. 31.
Your IRA
The deadline for IRAs is slightly longer. That shouldn’t be an excuse to wait either. An IRA is an easy way you can boost your retirement savings and give yourself a nice deduction in return. You can check the IRA limits to see if you qualify. Even if you don’t qualify for the tax deduction, you can still contribute to a tradition IRA.
Tax Harvesting
The end of the year is usually a time taxpayers look to sell investment losses to offset gains and lower their tax obligations. If you were planning on selling something anyway, look for opportunities in the last remaining months of the year. Make sure you specify the correct cost basis method at the time of sale. There’s no going back once the sale is finalized.
Tax season starts in just a few short months. Now is a great time to get a head start on preparing for next year.
