CARL WATTS & ASSOCIATES
December 16, 2013
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Washington DC
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tel/fax 202 350-9002 |
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2013 has been an eventful year, not in the least tax-wise! Nevertheless, you should, by now, be ready for the new tax year, right?
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If your answer is yes, then you have, for instance, all your papers in order to either file your own taxes or go to the tax professional. You kept a file (or files) for the year with every deductible receipt, medical expenses, taxes, mortgage interest, home office expenses, and any other tax-related documents .
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If you haven’t done so yet, there’s still a little time left, and here is why, as a consequence of the 16-day government closure, the IRS made the following announcement:
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“The original start date of the 2014 filing season was Jan. 21, and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4, 2014.” That means that your refund may be delayed, even if the end of the filing season stays put on April 15.
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Apart from this, there are several laws that have recently been enforced and which have tax implications: the American Taxpayer Relief Act of 2012 (ATRA, signed into law in January 2013), the Patient Protection and Affordable Care Act of 2010 (with provisions taking effect in 2013 and 2014), recent rulings on same-sex marriage, and more additional tax reform likely in 2014 can make 2013 and 2014 some interesting years, to say the least. |
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| With all of this going on, please know that there are still some things to consider doing before the end of the year to lower your tax burden. |
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| If possible, make payments this year that you would normally make early next year, including state and local income tax, property taxes, charitable donations, and deductible expenses (for those who itemize deductions). These can help increase your 2013 write-offs and, consequently, lower your tax bill. |
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Other items to consider for year-end prepayment with possible tax benefits include college tuition bills, planned medical expenses and expenditures like job-hunting and investment fees, and payments for tax preparation and advice.
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Are You Ready?
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One caveat to this strategy is owing the alternative minimum tax for this year. If you know that to be the case, prepayment of state and local income and property taxes will backfire, as write-offs for those items are disallowed under AMT rules, as are miscellaneous itemized deductions. |
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Fund your retirement account for 2013. You can do so by April 15, 2014, which is the deadline for contributions to a traditional IRA, deductible or not, and to a Roth IRA. However, if you have a Keogh or SEP and you get a filing extension to October 15, 2014, you can wait until then to put 2013 contributions into those accounts. |
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Review and adjust your withholdings, if necessary, so as not to pay too much during the year, or, to the opposite, get a high tax bill which may include interest and penalties. You may want to consider a last-minute estimated tax payment. |
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For those in the “high-earner” category, a word of caution, this year more than most, year-end planning should look to avoid spikes in income, whether capital gains or other income, that could break through either the 39.6% bracket or 20% capital gains bracket. |
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If your income may be too high to take advantage of lower rates, think about your loved ones who can benefit. You can always give them appreciated stock, dividend-paying stocks, or mutual fund shares.
Done the right way, and with the assistance of your tax advisor, these can be very tax-smart ideas.
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If you are going through lifecycle changes, these may impact both your year-end tax strategies and future tax planning. Such changes include: change in filing status such as marriage, divorce, death or head of household changes; birth of a child; a child no longer qualifies for child credit; child no longer qualifies for "kiddie" tax; casualty losses; changes in medical expenses; moving or relocation expenses; college or other tuition expenses; employment changes or retirement; personal bankruptcy; inheritance; business success or failure. |