2.     Not Maximizing Your Retirement Plan Contributions.

Whether it is a 401(k) plan, SEP plan or individual IRA, all taxpayers should take a look to see the advantages of using any tax deferred saving vehicles available to them for tax reduction strategies.

Remember, not all retirement contributions are deductible. For example, you wont get any tax break for a contribution to a Roth IRA, but your investment can accumulate tax-free and your earning and contribution withdrawals can be accessed tax free if you’ve had the account for at least five years and the distribution is made after you’ve reached age 59½. This can be a very strong strategy that should be considered by all taxpayers.

1.                  Ignoring Eligible Tax Deductions.

Taxpayers are eligible to deduct certain charitable contributions. Unfortunately, many people do not plan well and miss out on these deductions. While you may not think that the items that you give to charity have much value, you can research how much these items actually sell for to determine what you can claim. Keep in mind that the tax law says that taxpayers cannot deduct anything unless the donations are in good condition or better and receipts may be necessary as back-up or proof.

Another trap for taxpayers is not keeping track of out-of-pocket expenses that are associated with a charity. For example, the cost of stamps you buy for a fundraiser or the cost of food that you prepared for a donated meal or the cost of supplies you donated to a charitable organization can be fully deducted. In order to deduct these expenses from your tax return you need to keep track of them and then total those deductions.

A good tax preparer can determine whether or not you can deduct home office deductions and/or potential vehicle deductions if you own your own business or work out of your own home.

A good strategy to use is to look at your annual checking account transaction register and create a list of potential overloaded deduction items from the previous year and talk with your financial planner and tax advisor. Make sure you carefully track those deductions you wish to use. This will help when filing tax forms.

Despite all of the news we have heard about tax simplification, the current tax code still remains a complex combination of regulations, statutes, rulings and forms that are written primarily in highly technical language and cover thousands of pages.

Each year, several of the sections that calculate for certain information taxpayers report get adjusted. Rule changes can often be sorted by eligibility and the amount of exemptions, deductions and tax credits available for taxpayers can be phased in and out by formulas.

Most taxpayers are best served by using a qualified tax professional to either prepare or review their tax returns. A financial planner can help by providing tax planning strategies that often might be overlooked.

Over the next 6 days we will outline 6 potential tax strategies you can use to save money!

Our friends over at Ed Slott’s website www.irahelp.com sent us a really great little one sheet last week and we wanted to share it with you!  Ed Slott is one of our favorite radio guests and one of the top IRA experts in the country.  We’ll break up the information for you over the next few days, and we hope you find it as useful as we did.

Step #4:Celebrate the return of Qualified Charitable Distributions (QCDs)!

QCDs are back retroactively through 2012 and extended through 2013. This will expire at the END of 2013. QCDs allow taxpayers required to take annual distributions from their IRAs to direct those withdrawals to charitable organizations and treat them as tax-free distributions. Special rules also apply in January 2013 to make 2012 QCDs.

© 2013 Ed Slott and Company, LLC

Our friends over at Ed Slott’s website www.irahelp.com sent us a really great little one sheet last week and we wanted to share it with you!  Ed Slott is one of our favorite radio guests and one of the top IRA experts in the country.  We’ll break up the information for you over the next few days, and we hope you find it as useful as we did.

Step #4: Utilize new provision for in-plan Roth conversions.

You no longer have to be eligible for a distribution from your employer plan to go through with a Roth conversion as long as the plan has a Roth option (i.e. 401(k) to Roth 401(k)). Key points to consider: 1) In-plan Roth conversions CANNOT be recharacterized; 2) You must make sure you have the money to pay tax on the conversion; 3) Roth employer plans HAVE required minimum distributions  (RMDs); 4) You can utilize this provision for longer TAX-FREE growth in a Roth plan.

© 2013 Ed Slott and Company, LLC

Our friends over at Ed Slott’s website www.irahelp.com sent us a really great little one sheet last week and we wanted to share it with you!  Ed Slott is one of our favorite radio guests and one of the top IRA experts in the country.  We’ll break up the information for you over the next few days, and we hope you find it as useful as we did!

Step 3: Be aware of these other KEY tax law changes.

The $5.25 million estate/gift/GST tax exemption and portability for the estate and gift tax exemptions are  PERMANENT features of the law, and the top estate tax rate has climbed from 35% to 40%. Capital gains rates are the same EXCEPT for individuals in the highest income tax bracket, who will pay a 20% tax rate. A permanent AMT patch indexed for inflation was also instituted. The 2012 AMT exemption is $78,750 (married filing jointly) and $50,600 (single).

© 2013 Ed Slott and Company, LLC

Our friends over at Ed Slott’s website www.irahelp.com sent us a really great little one sheet last week and we wanted to share it with you!  Ed Slott is one of our favorite radio guests and one of the top IRA experts in the country.  We’ll break up the information for you over the next few days, and we hope you find it as useful as we did!

Step # 2 Plan with HIGHER taxes in mind.

The overall limitation on itemized deductions is back for those making $250,000 (single) and $300,000 (married filing jointly); personal exemptions will be reduced at the same limits; the payroll tax holiday expired with Social Security taxes going back to 6.2% from 4.2%; and the 3.8% healthcare surtax kicks in this year on net investment income of over $200,000 (single) and $250,000 (married filing jointly) along with a 0.9% surtax on wages at the same limits.

© 2013 Ed Slott and Company, LLC

Our friends over at Ed Slott’s website www.irahelp.com sent us a really great little one sheet last week and we wanted to share it with you!  Ed Slott is one of our favorite radio guests and one of the top IRA experts in the country.  We’ll break up the information for you over the next few days, and we hope you find it as useful as we did!

What is the American Taxpayer Relief Act of 2012?

This act addresses the expiration of certain tax provisions centered around what are called the Bush-era tax cuts. It tackles the tax revenue side of a Congressional deficit reduction plan, was passed by the United States Congress on January 1, 2013, and was signed into law by President Barack Obama on January 2, 2013.

Step #1: Understand the IMPACT of income tax law changes.

Roughly 98% of Americans will not be impacted by changes to the income tax brackets. However, individuals who file as single and make over $400,000/year or married filing jointly that make over $450,000/year will pay a 39.6% income tax rate.

© 2013 Ed Slott and Company, LLC