Taking steps to organize your finances now will help avoid surprises and determine if you need to seek help in paying your tax bill. Whatever your situation is, you'll enter the tax season with less stress and on the road to preserving – and improving – your financial well-being.
San Mateo, Calif. (Vocus) February 2, 2010
With the last of the holiday decorations stored, credit card bills (hopefully) paid off and the new year underway, the time is right for many Americans to embark on resolutions to get organized and improve their finances.
With the financial changes many Americans have faced during the past year's economic recession, the time is particularly right to review your tax situation, says Jeff Staley, president of Freedom Tax Relief, LLC. "This time of year – before the stress of April's tax deadline looms – you can determine whether you need to take action, organize things to lighten your burden in April, and make plans to pay any taxes owed." He suggests taxpayers take these steps now:
1. Organize receipts and data. Spend a few minutes every week sorting and compiling information, and your burden will be much smaller when April arrives.
2. Avoid surprises. Review a copy of last year's tax form and complete it with 2009 data to estimate your obligations. If you purchase tax return software, you can use that. Or go to http://www.irs.gov and download a PDF version of your form to fill out.
3. Take advantage of any tax credits. Make sure you have necessary documentation for any tax credits you can take. For instance, homeowners who add certain efficiency measures to their homes in 2009 and 2010 can take a tax credit of up to 30 percent of the cost of the materials used, up to a lifetime cap of $1,500. Learn more here.
The American Recovery and Reinvestment Act of 2009 (i.e., stimulus package) included many other tax credits, ranging from an expanded health coverage tax credit to new education benefits. Check the IRS home page to see if you qualify for any. You'll find a link on the home page for "Tax Benefits of the American Recovery and Reinvestment Act of 2009."
Additionally, if you purchased a home in 2009, you may qualify for the first-time home buyer tax credit with the Worker, Homeownership and Business Assistance Act of 2009 (which Congress recently has extended). The law provides for a tax credit of up to $8,000 for first-time home buyers, and a credit up to $6,500 for home buyers who have lived in their current home for at last five of the previous eight years, for purchases that go under contract before May 1, 2010, and that close before July 1, 2010. Required forms and documentation are available online.
4. Take a look at how the economy will impact your taxes. Check on investments to understand your losses from any sales. If you are self-employed, clergy, etc., and must pay estimated income taxes, estimate 2010 earnings to sketch out estimated tax payments for next year. If you have lost work, for instance, your total tax owed might be significantly less. Don't put yourself in a bind by paying too much in estimated taxes early in the year.
5. Check withholding. While a large tax refund might seem like a relief in April, it indicates that you are allowing the IRS to hold your money for nearly a year. If your 2010 earnings will be similar, consider filing a new W-4 form with your employer this month to have less withheld from your paycheck. Your take-home earnings will increase, and you can use that money to pay off debt or save for an emergency or retirement. If you had to pay taxes or had no refund, your withholdings might be fine as they are.
6. Maximize deductions. While it's too late to make donations to nonprofit organizations for 2009, it's not too late to obtain any needed appraisals or valuations to list these contributions accurately, per IRS guidelines. You can also take advantage of your resolve to get organized by setting up systems to maximize deductions for 2010. Set aside a bin or other spot in your home for no-longer-needed clothing and household items you wish to donate; incorporate charitable contributions into your monthly 2010 budget; and review stocks and other investments to note possible contributions for 2010. If you plan to contribute to a retirement plan, you can still make tax-deferred contributions for 2009 until April 2010.
7. Get help if you need it. Make a plan now to pay the taxes you will owe. The penalties for not paying tax owed with a filed return are much less than the penalties for not filing a return at all. If you owe back taxes, and/or if you are afraid that you will not be able to meet your tax obligations, seek help from tax debt settlement specialists who are skilled in dealing with the IRS.
"The New Year is a great time to make a fresh start," says Staley. "Taking steps to organize your finances now will help avoid surprises and determine if you need to seek help in paying your tax bill. Whatever your situation is, you'll enter the tax season with less stress and on the road to preserving – and improving – your financial well-being."
About Freedom Tax Relief (http://www.freedomtaxrelief.com)
Based in San Mateo, Calif., Freedom Tax Relief (FTR) provides consumer tax settlement services, helping financially distressed individuals resolve IRS problems. Working directly with the IRS on behalf of clients, FTR boasts an acceptance rate of more than 85 percent on IRS settlement cases. The company, which has served more than 7,000 consumers since 2002, is a wholly owned subsidiary of Freedom Financial Network, LLC (FFN).