December is a busy month – between figuring out just how to use those Thanksgiving turkey leftovers and buying Christmas presents – not to mention making New Year’s Eve plans! – it can be easy to put off thinking about your taxes until January – after all, your Form 1040 isn’t due until April 15! But taking a little bit of time to do some last minute tax planning can make the check you write in April a lot smaller – or even garner you a tax refund!
Some things to consider doing before December 31st:
Give It Away: You can reduce your tax bill by making charitable contributions – both cash, and non-cash. Remember, if you give non-cash items away (like professional women’s wear to Dress for Success) to document what you gave, and make sure you get a receipt for your records, to substantiate your contribution. Every year the IRS selects tax returns at random (and sometimes through a more targeted process) to audit, so it is important that every charitable contribution you include on your Form 1040’s Schedule A (Itemized Deductions) is backed up by a receipt, description, and even a canceled check if you have one.
Check It Twice: When was the last time you took a good, hard, look at your pay stub? If you have your paycheck “direct deposited”, wherein your employer deposits your paycheck in your checking or savings account electronically, allowing you to skip picking up your paycheck each period, and take it to the bank yourself, odds are you haven’t taken more than a cursory look at the amount shown in your bank account after each deposit. Take the time now to make sure that the year to date numbers on your most recent paycheck stub are accurate – including salary, social security, medicare, and withholding. If you’re not sure, then take the time to ask the payroll department before the end of the year, so any discrepancies are corrected, and not shown on your W-2 in February.
Don’t Wait To Have That Baby: I always crack up when I see some news anchor crooning over a “New Year’s Baby” – the first baby of the year. Now, obviously, most women don’t have a whole lot of choice when it comes to when their baby is born, but if you are due at the end of the year, consider this: If you give birth before the end of the year, then your baby will give you an extra exemption for the entire tax year – probably the only time when having a child will help your cash flow! The real award, then, should go to the women who gives birth to the last baby of the year!
A little bit of careful planning today can make your tax bill on April 15 a lot lower. Before you get caught up in your holiday gift shopping or New Year’s Eve plans, tidy up these items, and have a happier New Year!