Four things to do now to plan for year end taxes
Why not take a few easy steps before the end of the calendar year so you can enjoy a smooth tax season?
Four things to do now to plan for year-end taxes
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If you are the type who scrambles to find your tax documents at the last minute, you have the opportunity right now to prevent that panic when your 2010 taxes are due next April. Why not take a few easy steps before the end of the calendar year so you can enjoy a smooth tax season? Preparing now might even allow you finish early and do something you’ve rarely been able to do -- enjoy the month of March!
Here are 4 things to do now to prepare for next year’s tax season:
1) Create your 2010 tax folder. If you haven’t already done this, it’s important to at least make a placeholder for the documents that impact your taxes. Most people spend more time scrambling to find documents, than they do actually preparing or filing them.
2) Take stock of your retirement savings. If you are behind in your planned contributions to your retirement accounts, now is a good time to catch up to ensure you fund your vehicles adequately before year-end. Depending on your annual income projection, you may want to fund certain vehicles over others. For example, new rules have many people considering converting all or part of their traditional IRA to a Roth IRA. Consult your financial advisor when deciding where to put your money.
3) Document your charitable gifts. Review the donations you’ve made year-to-date, and look for opportunities to give to your favorite charities this year. Charitable contributions are an important tax deduction for many people, and it’s easier to plan ahead and be proactive than to wait for the end-of-the-year appeals. Use the last months of 2010 to fund your favorite causes and document the gifts. (Then file the information in that folder you just created.)
4) Explore tax breaks that expire in December. For example, many people are claiming a tax credit of 30% of the cost of installing energy efficient systems in their homes like furnaces, water heaters, or even insulation and storm doors. The maximum credit is $1,500, and the provision expires Dec. 31.
Imagine rolling into tax season knowing you took advantage of every move available to you – and being organized with your documents, too! Taking these steps will put you in a much better place when those deadlines come around.
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Ameriprise Financial does not provide tax or legal advice. Consult your tax advisor or attorney.
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