Taxes are not a once a year ordeal. At least they shouldn't be. There are plenty of opportunities throughout the year to plan ahead - saving you money. Below is a list of things you should consider while there is still time left in 2014:
1) Do what you can to manage your Income - This means a couple different things. Managing your money to produce income at favorable rates like long-term capital gains, and qualified dividends. Avoiding Large chunks of income in any one year such as selling an asset over multiple years versus a lump sum payment. Possibly delaying receipt of income until next year or speeding up expense to make sure they hit in this current tax year. By doing these things you can shift and save thousands in taxes every year. Make sure you manage those marginal tax brackets and the 3.8% surtax on net investment income. Ask yourself, "If I sell this asset in 2014, will that additional income put me into a higher tax bracket?" and "Will I now be subject to the 3.8% surtax on investment income?"
2) The Tax Man Cometh - Pay your Taxes - Don't forget to pay your quarterly tax estimates when they are due. The IRS requires you pay taxes when your income is earned. If you don't you can look forward to penalties and interest. Maybe even more important is you will avoid a large "Tax Surprise" at the end of the year. A quick tip, the IRS considers withholdings as being taken out evenly over the year even if they the actual withholding occurs later in the year. The goal here is to pay just enough to avoid penalties, but not too much or you will be giving the government an interest free loan.
3) Fund your Retirement, thank yourself later - This one is near and dear to my heart (being a financial planner and all). The IRS offers you plenty of opportunities to save for retirement, use them. There are studies that show these tax benefits can be substantial as your money is allowed to grow without the burden of taxes. In 2014 you can save $17,500 into your 401k, $5,500 into your IRA, and $12,000 into a Simple IRA (other rules apply). And don't forget about the Back-Door Roth IRA if you are a high income earner.
4) Energy Efficiency was so Last Year - Most of the energy efficient tax credits expired in 2013 but a few remain so make sure you get them if you are doing these improvements: Solar Power Upgrades, Fuel Cell Expenses, Small Wind Expenses, and Geothermal expenses. Keep in mind these upgrades might not be a good idea from a financial perspective but if your goal is to help the environment and you were going to make these upgrades anyway then you should get your tax credits.
5) What's going on with the Affordable Care Act? It's been in the news but how does it affect you. Well, it's complicated but at the very least make sure you are compliant. Under the act you need to have minimum essential health coverage or qualify for an exemption; otherwise be ready to pay a penalty for non-compliance when filing your taxes.
6) Where did I put that receipt? Keep Good Records - In order to take your favorite deductions the IRS wants proof. They don't just "trust you". Taking the mileage deduction? You need a log and need to track your commuting, business, and personal mileage. Making charitable donations? You need written acknowledgement from the charitable organization and possibly an appraisal if it's a large donation. Home Office Deduction? Let's talk. There's a lot of rules you need to be aware of.
7) Own a small business? Put your kids to work - You can deduct their wages as business expense and they will pay zero tax if their income is below $6,200 for the year. This can be up to $11,000 if they maximize their IRA. Added bonus - now that they have some income you can make them pay for some of their own expenses. Save on taxes and provide a life lesson on hard work!
Well that's it for now. We have a few more tips but I've heard you can only make blog posts too long and I fear I have already passed that mark. Jim says, "farewell and happy tax planning!"