It might be difficult to take some time from the holiday festivities to start thinking about the dreaded, upcoming tax season. If you usually avoid thinking about taxes until after January 1, you are missing out on a few simple preparations that will build up several last-minute deductions and save money. According to tax experts, now is the time to take last-minute action if you want to reduce your 2013 tax bill. Follow these five tips to make sure you are ready come April.
1. Double-check your tax withholdings and payments. Look at your pay-stubs and yearly income in order to be sure that you paid what you owe in taxes for 2013. This will help you avoid getting stuck with a bill or hefty penalties in April.
2. Update your information. If your information has changed at all over the past year, verify that it is completely up-to-date. In the coming months you will be receiving important tax forms and deductions. Don’t let mis-routed mail over-complicate the process.
3. Give to charities. Around the holidays is the perfect time to be extra generous. It makes you feel all warm and fuzzy inside, plus, with a receipt, you can apply for helpful tax deductions. Basically, it’s a win-win. Make sure to donate money, clothes or unwanted items before the year is over.
4. Prepay your taxes (if applicable). Another way to lower your total tax bill is to prepay your 2014 property and state income taxes, if this is an option. Both are deductible on your federal income tax form and can reduce your tax bill for 2013.
5. Make large purchases now. If you are planning on buying a car or other major purchase, it might benefit you to do so before the end of the year. This is because the sales tax deduction goes away in 2014, unless Congress reinstates it.
Check out IRS.gov for more resources and always carefully read the instructions on your tax forms to ensure you don’t miss out on money-saving information.