http://www.fool.com/taxes/2005/taxes050617.htm?ref=btpStart Planning for Next Year's TaxesBy Roy Lewis (TMF Taxes) June 17, 2005 Many think that taxes are simply a chore, something to attend to once a year. Anyone with that attitude is likely leaving money on the table. Those who view the tax process as an opportunity to save money will be the real winners. With the recent tax law changes, planning for the reduction of your 2005 taxes is more important than ever before. Here are a few suggestions that you should consider in order to jump-start your tax planning and get you on the road to paying less in taxes in 2005...
I'll add another topic of interest:Check those withholdings. You've heard the saying; getting a big tax refund means you gave the government an interest-free loan of your hard-earned money. Don't let Uncle Sam take any more of your money than he needs. Once July rolls around, you'll have half a year of income and expense data that will help you better estimate your final year-end totals. Use these numbers to adjust how much money is withheld in taxes each pay period, and try to peg your total withholdings within a few hundred dollars of your anticipated tax responsibility. This process is easier than it sounds; thankfully, the IRS supplies a handy withholding calculator ( http://www.irs.gov/individuals/article/0,,id=96196,00.html ) on its website to assist you with this process.Bill
Once July rolls around, you'll have half a year of income and expense data that will help you better estimate your final year-end totals. Use these numbers to adjust how much money is withheld in taxes each pay period, and try to peg your total withholdings within a few hundred dollars of your anticipated tax responsibility. Great advice, for which I'll offer a special "Yoo-hoo" to intended 2005 newlyweds. That fabulous New Year's Eve wedding you've dreamed of means, for tax purposes, that you were married for the entire year. Figure out what effect the marriage will have on your taxes now, while there's still something you can do about your prepayments.Phil
And for those of you who *could have* large deductions or carryover credits from last year, or can put off income, such as IRA or pension distributions, til after Sept 1, or pay your property taxes in January, look into the Annualized Income Method for computing your installment payment in advance. Even if you have only withholding, if it isn't enough there's a lot of ways to recuce your penalties. ed
I'll add one more suggestion to the pot. Now that you've got a half year of income & expense to review, check to make sure you're not a candidate for the dreaded Alternate Minimum Tax. Rough out your 2005 tax return on 2004's tax program and to see if you should be doing some tax planning to minimize your tax consequences. You may want to seek professional guidance.If you have taxable income as low as $75k, you could be subject to AMT.Arleen
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