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Tax planning: Year end tips to ease the pain

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Whether you are a business or an individual, It’s time to be thinking about pulling together your 2013 tax records. I know, I know. The holiday season is no time to be thinking about taxes but starting now will save you a great deal of time and frustration. It will also help you know your tax liability, if you have one, and give you time to prepare for paying it. Also, you have until December 31st to quality for any tax deductions or tax credits. Isn’t that much better than waiting until the last minute and not have any tax deductions and incentives left? Just something to think about.

Here are a few tips that will make the tax preparation process easier:

1. If you don’t already use and accountant or certified public accountant (CPA), consider getting referrals for a few and then interview them. Adding an accountant to your team is a smart move because you’ll almost always gain more deductions than if you completed and filed your own taxes. A good CPA should be knowledgeable of tax laws as they pertain to your area of specialization. For example, if you are a small business, you’ll be interested in a CPA who knows the tax laws pertaining to small business. If you are a stock investor, you’ll want a CPA who has expertise with the tax laws pertaining to the stock market.

2. Estimate your tax liability or refund. There are many websites designed to help you get an estimate but once again, use a professional accountant or CPA to help with this task. Not only will you get an idea of your tax liability but you’ll also get educated on what strategies you can use to minimize the tax liability.

3. Reduce your income. Take a look at your retirement contributions and consider maximizing on the amount you can contribute this tax year. 401(k) and IRA plans offer you the avenue for reducing your adjusted gross income. Other areas that may or may not apply include student loan interest, alimony, and classroom related expenses.

4. Review your deductions and look for opportunities to reduce your tax burden. Itemized deductions in areas of health care, state and local taxes, personal property taxes (such as car registration fees), mortgage interest, gifts to charity, job-related expenses, tax preparation fees, and investment-related expenses can make a big difference. Keep track of these by automating your accounting process. Consult with your accountant or CPA for their guidance as to which software application is right for your specific business.

5. Consider scanning your receipts, bank statements, and other tax related documents. Electronic copies burned to a CD or flash disk and cataloged will help your accountant tremendously. If you find yourself looking all over the place for your documents this year, setup a filing system so that you can place the necessary document or receipt in it’s rightful folder next year. Then you’ll be able to breeze through the data gathering process.

Successful business owners focus on making as much as they can with their business and then they spend as much as they can throughout the year so that they can minimize their tax obligation legally. In many cases, some of your personal expenses such as internet connectivity, toner, ink, paper, personal computers, etc. may be claimed as deductions. Before deducting any of these items, make sure you consult with your accountant or CPA.

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