Tax Time – Tips for Getting Started

The idea of facing the accountant after a year of unorganized spending can be enough to send some folks into a cold sweat. The good news is that it is never to late to start getting things in order. Start right now and you should be prepared to meet with the accountant as soon as your W9’s and other forms come in the mail.

1. Write out all of the items that you can deduct from your taxes – like medical expenses, business expenses, donations and begin sorting through your canceled (or duplicated) checks for records regarding these types of donations.

2. Start making folders – one for each category that you can deduct (with business expenses make a folder for each business category, like advertising, educations and gas).

3. Sort through all the bills from last year. Put them in order from January to December. Highlight any charges that you believe may be tax deductible.

4. Make a list of all the deductions in each folder and put it on the front of the folder.

By making it easier for your tax accountant to work through your funds you will make it easier to get your refund (and maybe even make it possible to get a larger refund). Start organizing now and you will be ready right after January 31.

As 2008 wraps up, it’s time to start thinking about taxes. There is some good news out there for homeowners. Recent tax law changes could mean new tax breaks for you, according to this article from Kiplinger. Here’s a rundown of the potential tax breaks:

First-Time Buyers

If you bought your home after April 9, 2008, or even during the first part of 2009, you may be eligible for a tax credit equal to 10% of the purchase price, up to $7500. It works like a tax-free loan that must be paid back over 15 years. To qualify, individuals must meet income requirements and if you move before the 15 years is up, you have to repay the loan in full.

Non-Itemizing Homeowners

If you don’t itemize, here is another tax break you can take advantage of. It’s a standard deduction of $500 for individuals and $1000 for married couples. The purpose of it is to offset real estate taxes that you would be able to deduct if you itemized your tax return. This could be a good option for those that purchased homes late in the year and don’t have enough interest paid to make itemizing a good choice.

Homeowners Paying PMI

If you didn’t put down at least 20% of your home’s purchase price, chances are you’re paying PMI, or Private Mortgage Insurance. If you made PMI payments in 2008, and your income is less than $50,000 as an individual or $100,000 as a married couple, you can deduct 100% of your PMI. Your home must have been purchased or refinanced since January 1, 2007.

DC Homeowners

Congress also extended a tax credit for home buyers in the District of Columbia. First-time homeowners are eligible for a tax credit of up to $5,000.

Only a few weeks remain in 2008. Make sure you’re prepared for the upcoming tax season by taking these six steps I found in USA Weekend magazine.

1. Withholdings. Are you having too much taken out of your paycheck? Now is the time to find out. Instead of giving the government an interest-free loan in 2009, take more money home. Use the IRS withholding calculator to get a more accurate number.

2. Stock Losses. Chances are if you have money in the stock market, you lost money in the stock market. If you sold your investments and lost money, you can deduct up to $3000 of that (or $1500 for married couples filing separately.) That could help you relieve some of the tax burden.

3. O% Capital Gains. If you did make money in long-term holdings and you fall in the 10% or 15% tax bracket, those gains are tax-free.

4. Car Breaks. New cars purchased in 2008 that are used just for business driving can be claimed for a “bonus depreciation” of up to $11,160. Hybrids also have their own tax breaks.

5. Standard Deduction for Real Estate Taxes. If you decide not to itemize, you can claim up to $500 in deductions for property taxes or $1000 for couples filing jointly.

6. IRA Charitable Contributions. If you are 70 1/2 or older, you can take up to $100,000 our of your IRA each year tax-free if you give that money directly to a charity. You won’t get a charitable deduction but it could push you into a different tax bracket which could mean other tax breaks.

The end of the year is closing in. That means it will be tax time before you know it. Here are just a few deductions that you may not have thought about but don’t want to miss.

1. Safety Deposit Box - when it is used to store your tax papers then it can usually be deducted from your income taxes.

2. Office Space for Self Employed - if you have an office in your home then you can deduct a percentage of your home expenses (mortgage interest, utilities, house cleaning, maintenance, water, supplies). Bring all of your receipts (preferably totaled up in categories) to your accountant so that the exact amounts can be figured up. You will also need the square footage of you office space and also the square footage of your home.

3. Gambling losses - you are able to deduct the amount that you lost up to the amount that you won. This at least balances out your winnings and keeps them from pushing your income limit up a tax bracket.

4. Moving expenses - when you have to move more than 50 miles for your job you are able to deduct the expenses involved with the move.

There are so many opportunities for tax deductions today. Just take a little time to talk over options with your accountant and even do a little research of your own so that you don’t miss out on any of the opportunities available to you.

Accountants can not work miracles. They can only take the information that you have provided and do the most with it. The end of the year is closing in and now is the right time to start thinking about the information you will need to put together your tax returns.

1. Receipts - go through your receipts and pull out the ones that can be used for your taxes. You might even go ahead and break them down by categories and then add up the titles.

2. Medical expenses - bring a list of all the bills that you paid for medical purposes (and any receipts as well). This includes any doctors, eye exam or other visit.

3. Mileage - if you are self employed then make your work a part of every errand run so that you can use that mileage on your taxes. Remember that now milage for tips to the doctor can also be deducted.

4. Household bills - if you are working from home and have a designated spot where you work (a guest room, a closet or a corner of the kitchen). Deductions are allowed for what ever percentage of the entire home is compared to the percentage of your work space.

5. Neatness counts - when things are kept in order then it is easy to follow through. Keep your accounts in order so that you can still give what you need regardless of the consequences.

There are plenty of things that you can start doing now that will help you create a budget that works for your savings and future financial benefit.

The government started this fiscal year with a record high deficit. This is mainly due to all of the recent bailouts that have been instituted to save companies. Not the Mom and Pop stores, mind you. The government bailouts have only gone to the big companies that are too big to be allowed to fail.

Just recently American Express was able to change its identity to one that makes it a banking institution so that it would be able to receive some of the bailout money. I have to wonder if I could be eligible if I changed the name of my company or business to something with ‘the bank of’ in its title.

Now the government is going to step in and bailout more companies once again. This time it is the top three automakers (although I don’t know how top you can be if you have to be bailed out). There was a time when sound business practices are what kept a business running and not a government check.

The top three automakers in the United States pay more per hour to get a car made than the other companies - as much as 3 times more. If business A makes a product for $50 and business B makes the same or nearly the same product for $150 then can you guess which one is going to have the most profit at the end of the day.

Hand outs are NEVER good. There are times when people,individuals - need a hand up so that they can regain their balance and go on. But companies have to make it on their own or this ceases to be a free market society.

What’s worse is that you and I are paying for these government bailouts. CEO’s, administration and even workers in the companies that are making WAY more money than I am are using my money to get a paycheck. It just doesn’t seem right.

The record high deficit will continue to climb as long as the bailouts flow freely. The government is building up a debt at a time when the rest of us are being called to dig out of debt. It has to stop now or we will be selling out the future of our children.

There have been a lot of talks about more stimulus checks getting sent out to try and boost the economy out of its slump. I guess that’s an understandable move - since the first stimulus check helped the economy so much.

The scripture tells us to support one another and that all things belong to all people. It is one thing for God to dictate how His blessings are utilized. It is quite another when the government steps in. There is something that makes me inherently uncomfortable about spreading the wealth around.

Watching the television reports and reading the print media make me wonder if I’m all alone in my concerns. According to these reports the other people in my position are excited.

My family is not rich. Even if you use the terms set forth by Senator Obama my family is still not rich. But when we do reach that peak of financial success we should be the ones that determine how (and if) we share that success.

Even though I might be one of those that benefits from the wealth sharing today, it will only be stealing from my children. There is an ultimate price for all of these packages that are beginning given and being promised - it’s the future.

So many people spend a great deal of time and effort trying to get that large refund from the IRS each year. Many think of it as free money. But the truth is that the government is using YOUR money, interest free, for the entire year and then just giving you back what you should have had in the first place.

If you want to turn it around and start keeping your money from the beginning then you need to change how your insurance is deducted in the first place. When you fill out your employment forms, you also fill out a withholding form. This includes all of your potential deductions. Talk with your accountant before filling out the withholding so that you can be sure to get as much money as possible with each paycheck.

Be careful with the deductions. The government will get upset if you under pay your taxes. They don’t mind if you over pay, but they will be sure to catch you if you short them – even if you make it up at the end of the year. The government requires that you pay 90% of next years taxes or 100% of last years taxes before the end of the year.

Finding the balance between getting a refund and having to pay at the end of the year is difficult. The perfect answer is to come out with a zero balance, but this takes time and effort. Work with a tax professional to determine your withholding amounts and also to insure that you are getting all the deductions that you can.

There has been a lot of focus on subprime mortgages over the last several months. So much attention has been cast that even congress has stepped in to make things right. But I recently had the chance to sit down with someone in the industry who has the job of dealing with the troubled situations and he told me that the majority of foreclosures that he is dealing with now are NOT subprime.

The more I thought at about the foreclosure rate and the more I thought about consumer debt in the United States then the more I came to realize that the problem isn’t in the lending industry, but is more likely in the borrowers. Here are some tips to help YOU avoid the foreclosure trap.

1. Always borrow less than you can afford to borrow. By keeping your debt to income ratio a low number you will be able to afford those unexpected situations that often come up when you are just living your life.

2. Always borrow less than the property is worth. There is no way to guarantee that the housing market will remain high, so keep your borrowed amount to at least 80% of the current market value.

3. Always buy with the intent to sale. Keep your eyes on the location, the amenities and the other characteristics that make it possible to sale a home. Things change, even when you don’t plan for them to change, and having a strong location will help you sale if you have to sale.

4. Always treat the home like you plan to live there for generations. Maintenance of the home will help hold its value and will help keep down costly repairs.

There is so much you can do to help keep your home from falling into foreclosure. Keep in mind that it is not just the subprime mortgages that are running into problems. Everyone that has bit off more than they can chew are finding that the mortgage industry is now chewing them up and spitting them out.