Posted: August 04, 2009
Halfway Through 2009: Take a tax checkup
It’s hard to believe that it’s already the second half of 2009. If you are like many of my clients, it probably feels like you just mailed your 2008 tax returnRick LaFave
It’s hard to believe that it’s already the second half of 2009. If you are like many of my clients, it probably feels like you just mailed your 2008 tax return
But while it may be summer, we’re already on the backside of 2009. That means you’re running out of time to make changes to your (or your company’s) financial situation to see a benefit on this year’s return. If you haven’t gotten your act together yet, this is a great time to start. Just like seeing the dentist, consider this your mid-year checkup.
Here’s how to get your taxes in order:
I was speaking with a client recently and I realized that, while this seems like the easiest step (after all, it doesn’t take lots of specialized knowledge to organize your records and your tax approach), this is actually the hardest part for so many people.
Many folks don’t know where to start. A great place is with your deductions. Are you keeping receipts and a running list of all of your charitable deductions? Are you self-employed, and do you use your car for business purposes? Then you need to keep a detailed mileage log. (You should also be keeping receipts and records of deductible business expenses, so you’re not left scratching your head next year — not to mention paying more in taxes.)
Be aware of new tax credits
There are a number of new tax credits this year. You’ve probably heard of the Making Work Pay tax credit of $400 for individuals and $800 for couples. Your employer should have adjusted withholding so you’re getting a bit more from each paycheck, but check to see if that’s the case.
And if your employer decreased your withholding but you’re not eligible for this credit — because you make too much money, for instance — you need to remember that your tax liability will be greater next spring. If you’re self-employed and eligible for the credit, adjust your estimated payments accordingly.
Time is running out for other credits as well. Thinking about buying a car or becoming a first-time homebuyer? Or if you own your home, are you planning any making energy-efficiency improvements to it? If you want to see a tax benefit next year for any of these undertakings, you need to move quickly.
Look at your investments
Chances are good that you don’t need to be told to look at your investments. Most people have had one eye on them for a while. Since your balance is probably down in the last year, should you start putting more money into your 401(k) to get back on pace with your retirement goals? The maximum employee contribution rose to $16,500 for 2009, from $15,500 last year.
With the changes in the markets in the last year, some people are taking another look at their estate plans, and how taxes come into play. Even if it takes a tough economy to force you into action, it’s always good to have an updated estate plan.
Remember, the goal should not be getting back a big refund next spring. While that’s nice and something to look forward to, it’s smarter to reduce your withholding and put that money in the bank right now. Especially given the markets’ recently improved performance, you can make that money work for you rather than for the IRS.
Rick LaFave is a principal with H&R Block Tax & Business Services (formerly Vantive Partners) in Centennial. With 11 offices in the Denver area, H&R Block Tax & Business Services specializes in providing clients with a proactive approach to individual and business tax strategies. Visit www.HRBTaxandBusiness.com for more information.