Planning for Taxes Now Can Reap Benefits
Review 5 areas before Dec. 31 to plan income tax filing strategy
SAN MATEO, Calif., Dec. 17, 2008 - An important, but often neglected, tax deadline is looming this month, said Bills.com president Ethan Ewing: Many actions must be taken before the end of this year, and still others require careful advance planning, to achieve hoped-for tax benefits when filing returns next year.
"Now is the time to take action," Ewing said. "To get the most from your tax planning, it is wise to take a step back and understand your tax position before the end of the calendar year."
Tax goal-setting is all the more important in a year like this one, which has presented a roller-coaster ride of unexpected financial activity. Here are a few ways to begin:
1)Get facts straight. Before the year is up, organize receipts and data. Spend a few minutes every week sorting and compiling information to lessen the burden come April.
2)Do a test run. Obtain a copy of last year's tax form and complete it with 2008 data to estimate this year's obligations. Those who purchase tax return software can use that. Or go to www.irs.gov and search for the form. Taxpayers can download a version of the form and fill it out.
3)Maximize deductions. Deductions come in a variety of flavors. Review your options, as well as previous years' tax returns, to understand which options might apply. Check with a tax advisor to make wise choices. Some items to consider:
- Plan donations to nonprofit organizations of money, old or unneeded vehicles, clothing and household items, or stocks or other investments. Be sure to obtain any appraisals or valuations needed to list these contributions accurately, per IRS guidelines. Make any planned donations far enough in advance of Dec. 31 to ensure they are received and logged in time to count for 2008 deductions; it is easy to delay these till it is too late, or forget about them once the holidays start in earnest.
- Check flexible spending account balances. If a balance remains unused, check whether you can make relevant purchases to use the money before you lose it. Consider purchasing medications or contact lenses, seeing the dentist, or investing in any other needed medical or dental care.
- Check health insurance deductibles and medical expenditures. If an expensive procedure is on the horizon and you have reached or nearly reached the deductible, consider scheduling the procedure in 2008 rather than 2009 to maximize benefits. Similarly, medical and dental expenses that total more than 7.5 percent of adjusted gross income are usually tax deductible. If expenses are near that benchmark, consider receiving other needed care to be able to deduct some of these costs.
- Check retirement contributions. Greater savings means greater deductions (to the extent regulations allow). And with stocks low, it could be a great time to invest for the future for some individuals.
- Pay ahead on student loans. If you have not maxed out deductible student loan interest, paying extra on loans might provide for additional deductions.
4)Estimate how the economy will impact taxes. Check on investments to understand losses from any sales. If you are self-employed, clergy, or for other reasons must pay estimated income taxes, estimate earnings for 2009 to sketch out estimated tax payments for next year. Those who have lost work, for instance, might find total tax owed to be significantly less. "Figure out what you owe and when. Then you will not put yourself in a bind by paying too much in estimated taxes early in the year," Ewing cautioned.
5)Get help if you need it. "If you owe back taxes, or if you are afraid that you will not be able to meet your tax obligations for this year, seek help from tax debt resolution specialists who are skilled in dealing with the IRS," Ewing said. For more information, visit www.freedomtaxrelief.com.
"By the time the New Year arrives, you will already be halfway to the perennial resolution of being more organized when it comes to taxes," Ewing said. "Most importantly, you will know you are doing your best to maximize your cash flow during these trying financial times."
About Bills.com (www.bills.com)
Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 40,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at http://www.bills.com/news_releases/.
Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine's Hot 100 list of the fastest-growing U.S. companies. Bills.com also was named a finalist as "most innovative company" in the American Business Awards in 2008. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and are recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.