April 2014 is right around the corner. Here are some smart tips that may help you capitalize on your individual situation and listen to that little voice in your head telling you to save, save, save:
- Are you under- or over-withheld? If you came up short and had to pony up money when you filed your taxes, consider increasing your withholding. More money will be taken out of your paycheck throughout the year, but you won’t have to come up with a lump sum to cover a shortfall when you file. On the other hand, if you received a refund, you may want to decrease your withholding. Every pay period, you can save that extra money in an IRA instead of allowing the IRS free use of your funds. Use IRS Form W-4 to make changes to your withholding.
- Match up gains and losses. Although it’s too late to use this strategy for tax year 2013, you may want to consider this for 2014. If you sustain capital losses during this year, they can generally be used to offset capital gains. At the end of the year, look at your portfolio and determine if you can match one transaction against the other to reduce your tax burden. Keep in mind however, that you need to match long-term against long-term and short-term against short-term. If you’re facing a significant capital gain, you might consider selling some losers before year’s end. Don’t wait until the last minute to get help from your tax professional.1
- File electronically. Regardless of your income, you can file your tax returns online for free through the IRS website at www.irs.gov. If you’re eligible for a tax refund, filing electronically will help you get it more quickly than mailing in your returns.
- The voice in your head. When filing your tax returns electronically, the IRS allows you to designate to which account(s) it should transfer your refund. You can opt to have part or all of your refund transferred to your IRA and/or any other account you select. Remember, if you don’t see it, you won’t spend it. Listen to the smart little voice in your head telling you to save, save, save.
A bit about fraud
Check with the IRS before you subscribe to any scheme that offers exemption from your obligation to pay taxes. Buying into a tax evasion scheme can be very costly. Takeaway: If it sounds too good to be true, it probably is!
The IRS issues news releases on some of the common scams, including the annual Dirty Dozen list of tax scams.
If you haven’t yet filed your tax return and you have questions or run into a problem, visit www.irs.gov or call the IRS toll-free at 800-829-1040.
Best tip: Stay informed and of course, stay smart and save, save, save.
For informational purposes only. Neither Farmers New World Life Insurance Company, its employees nor its Agents provide legal or tax advice. Always consult your own attorney, accountant or tax adviser as to the legal, financial or tax consequences and advice on any particular transaction.