This is not a post about making a tax resolution that won't be kept. I want to make a few simple suggestions that could save you grief a year from now.
- Check your withholding. If you have been coming up with a balance due when your taxes are prepared, this might be the solution to that problem. No more possible deductions? Then you might have to face the fact that a little more needs to come out of your pay. And, whether or not you change your W-4, keep an eye on your pay stub. Federal withholding should increase this year since the Making Work Pay Credit ended. Does yours? Then there could be a data entry error or computer glitch that changes your withholding accidentally. Check a pay stub early in the year and anytime the check doesn't seem right. The longer it takes to catch a withholding error, the harder it is to fix it.
- Plan for changes. Retiring? Buying a house? Becoming an empty nester? All of these could impact your taxes. Talk to your preparer or do some research to find out how your taxes could change and what you can do to take advantage or plan for the change.
- Emergencies can effect your taxes. Lose your job and need to draw from a retirement plan or draw unemployment? A health issue that changes your income? Find out what is taxable. Please understand that the withholding that comes out of your retirement plan or unemployment doesn't "cover" the taxes. Your taxes are based on all your income, not just the emergency money. Their withholding is generally a set percentage (unless your specify otherwise) and that may not be enough in your situation.
- All tax info is not the same. He may be the best barber in the world but that doesn't mean he knows anything about taxes. Don't disregard the advice you receive from non-tax professionals. But do check out what they are saying for the full story.
- All returns are not created equal. It's tempting to compare your return to what you hear from co-workers and friends. But a single deduction or withholding set a little differently can be the difference between your refund and her balance due.
- There is no magic deduction/credit. You are entitled to all the deductions/credits you legally qualify for, nothing more. Sometimes the only thing you can do is pay/pre-pay the tax.
As 2011 begins, take control of your taxes. If you don't understand something, ask your preparer or do the research. You might not like the answer but it sure beats wondering if there is something else you could do. Wondering never solves the problem.