BY HARSH “HARRY” MEHRA
The New Year has brought with it new tax legislation. Some of the changes will affect your 2012 taxes, while others won’t kick in until tax years 2013 through 2017. Minimizing your potential income tax liability requires a regular review of your financial picture and the current tax strategies available to you. In fact, tax planning can be a year-round activity.
Although your tax picture is unique to you, there are steps you can take now to ensure that you are better prepared to file your 2012 taxes.
• Organize your 2012 tax file. Keeping complete records may help you save money, especially if it prevents you from having to hunt down or recreate information. In addition, your tax professional will appreciate having the necessary materials on hand.
• Update your name and address. If you moved or changed your name in 2012, be sure to update this information with all mediums that relate to your taxes, including with:
o Former employers
o Banks and lenders
o Brokerage firms
o The Internal Revenue Service and state tax agency
o Investments and trusts
o The Social Security Administration
Neglecting to do so could delay the receipt of necessary documentation you need to file your tax returns.
• Review IRA opportunities. If you haven’t maxed out contributions to your retirement accounts, it’s not too late. For traditional, SEP, and SIMPLE IRAs, as well as 401(k)s, the deadline for 2012 contributions is April 15, 2013 (extensions may apply). Remember: Contributing more to pretax retirement accounts lowers your taxable income—and thus your tax burden—for the year, which could increase your refund or decrease the amount you owe.
• Use up your flexible spending account (FSA). Hand in medical receipts from doctors, dentists, clinics, therapists, and pharmacies. If you find that you haven’t spent enough to get all of your deductions back, contact your plan supervisor or payroll department to see if you have any extra time to do so; the deadline is generally around March 15.
• E-file your return. E-filing is not only an environmentally friendly way to file your taxes, but it’s also a faster way to receive your refund. You can even choose to have your refund direct-deposited into your bank account, so you don’t have to worry that your check will be lost in the mail.
• Notify the IRS if you fell victim to identify theft in 2012. The IRS will provide you with an Identity Protection Personal ID Number (IP PIN) and flag your account. The IP PIN will serve to verify your tax return and protect your refund.
Mistakes to avoid
Every year, many Americans make easily avoidable mistakes on their tax returns:
• Claiming the wrong status. When filing your return, you cannot simply choose either single or married. If you are married, you have to indicate whether you are filing separately or jointly. Claiming the wrong status may limit your eligibility for tax credits.
• Failing to use the correct forms and schedules. Using the incorrect forms and schedules can delay the approval of your return—and it could increase your chance of getting audited.
• Not signing and dating the return. If you fail to sign and date the return, the return is considered unfiled. Unfiled tax returns are subject to many penalties and interest on taxes you may still owe. This also applied to e-filed returns, which require a PIN for an electronic signature.
• Failing to report all income. Unreported income has come under heavy scrutiny recently, and it could even lead to civil and criminal sanctions. The IRS now considers all deposits into any of your accounts as income, unless you can show that they are not. Be sure to keep a detailed record of any and all income you receive.
Taking advantage of these tips can be key to a more efficient tax filing process, but the most important step you can take is to get started. Being proactive is always better than procrastinating. Happy filing!
Harsh “Harry Mehra is a financial advisor located at North Point Wealth 11675 Great Oaks
Way, Alpharetta, GA 30022. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 678-990-0019 or at email@example.com.
BY HARSH “HARRY” MEHRA