December 19, 2011

Claiming 2011 Tax Benefits – It's Now or Never (part 2)

In my previous article, I wrote on some tax moves you can make to reap some cool tax benefits next year. But these moves must be done before December 31, 2011. Here are those I have shared in my previous article:

1. Energy efficient home improvements
2. Giving
3. Contribute more to an IRA
4. Take up the minimum IRA distribution

Here are other things you can do to save some tax money next year.

5. Sell off losing shares

Go through your investment portfolio and identify losing stocks and sell them at a loss (to cut your losses). These losses can be deducted from your capital gains tax by up to the amount of gains plus $3,000 extra.

6. Deduct your sales tax in lieu of state income tax

If you live in a state where there is no state income tax, you should consider buying large assets like motor vehicles or mobile homes and itemizing your deductions when you file your tax returns. You are allowed to add state and local sales taxes you paid in 2011 to the deductions from the IRS sales tax tables. In addition to motor vehicles and mobile homes, other major asset expenses like renovations to your home and a house extension also qualify.

7. Revise your tax withholding

Most taxpayers overestimate their tax withholding and end up receiving a substantial refund check a year later. Why not reduce your tax withholding and receive more in your salary? If you are an employee, go to the IRS website, www.irs.gov and use the Withholding Calculator to calculate the amount of withholding you should make. If the amount of withholding you have been making is substantially higher than necessary, you may want to submit a fresh W-4 Form to your employer next month. If you are not an employee, you can increase or decrease the estimated tax payments you make to the IRS for 2012.

8. Update name and marital status changes with the SSA

You should inform the Social Security Administration (SSA) of any changes in your marital status and name so that their records are in synch with that of the IRS before you file your tax return. If the records do not tally, whatever tax refund you are entitled to will be delayed. Likewise, you should inform the SSA, IRS and your employer of any change in your address. For more information, visit the SSA website at www.socialsecurity.gov.

9. Make arrangements with the IRS to pay your taxes

If you have found it a burden to pay last year’s taxes, do contact the IRS now to make arrangements for payment next year. Recently, the IRS announced the new Fresh Start program in 2011 that offers relief to many individuals and small businesses struggling to pay their taxes. Find out more at www.irs.gov by searching “Fresh Start” in the search box.

Be Sociable, Share!