6 Tax Saving Tips To Help You Save Money Next Year

tax saving tips

Organization is the key to a successful tax year. When it comes to the IRS, you pay dearly for your lack of organization.  While you might think you only disappoint your spouse if you don’t organize your personal finances, you will also disappoint your uncle – Uncle Sam.

Believe me, Uncle Sam is not someone you want to disappoint. With taxes there are smart year end tax moves and smart tax moves at the start of a new year.

6 Ways To Save Taxes Next Year

1. Get Your Filing Cabinet In Order

Soon enough you will be inundated with paper work.  The post office is the only institution that is happy at this time of the year.  You need to prepare today so your tax season will go more easily.  If your taxes are relatively simple just start a new file in your filing cabinet that says “2009 Taxes”.  Any time you get a tax document in the mail just drop it in that file (until you get the energy to deal with your taxes).

If your taxes are more complicated you might want several files for all the different documents. In addition, you need to start collecting all of your tax related documents into one source.  Make the appropriate file and get it ready.

Start reviewing your current documents to be sure everything is in order. A little work today saves a throbbing head tomorrow.

2. Start a Automobile Log

Include the following categories on a notebook you put in your glove box.

Date, destination, purpose, start mileage, finish mileage, category (business or charity).

Did you know that you can deduct miles used for charitable work?  If you do any charity work (and I hope you do) you need this notebook in your car.

Also, if you do any driving for your company you need to record all of your miles in this book.

3. Glance Through A Tax Book and Start a Record Book

A simple trip to the library ought to do it.  I’m not even going to make you read the whole book.  Just pick up a basic tax book and turn through the book page by page.  Here is a one such tax book.  Take note of any categories that are tax deductible.  Now on your computer or notebook write that category – for example, medical expenses.  If you’re not a pen and paper person, just visit www.irs.gov and search for eligible deductions.

Here’s a quick list of deductions to get you started – medical and dental expenses, taxes, interest expenses, charitable contributions, theft and loss, car expenses and other employee business expenses, tax benefits for work related education.  You will also want to familiarize yourself with other miscellaneous deductions.

Through the remainder of 2010 anytime you have a qualified medical expense, write it in the book or record it.  Trust me, your 2011 self will thank you when it comes to tax season.

4. Open a Traditional IRA

IRAs are a great way to avoid capital gain taxes.  If you have not yet opened or fully funded an IRA, you can do so today.  In fact, you have until April 16th, 2010 to fully fund your 2009 Roth or Traditional IRA.  Your 2009 limit is $5,000.

As you review your tax situation, if you are on the threshold of a higher tax bracket, a Traditional IRA might be a great tax move.  Just as a reminder, a Roth IRA will not reduce your 2009 tax liability as you will pay taxes on that money today.  Nevertheless, it still might be a better choice for you.

You might even want to consider converting to a Roth IRA in 2010.

5. Set Your Tax Calendar

If you keep a calendar on your computer, this would be a good time to enter some important reminders.  Set your calendar to remind you early enough to complete the task.

  • Schedule estimated tax payments (if self employed)  – by January 15th make your final quarterly payment for 2009.
  • Reminder to do year end tax planning (set reminder for October).
  • April 15th taxes due
  • January 31st deadline for most tax documents to be posted
  • Set a goal for when you want to have your taxes done – i.e. March 15th, 2010.

6. Anticipate Changes In Your Tax Situation

Changes you make in 2010 can have drastic tax implications.  It would be advisable for you anticipate those changes and then read about how that change will impact your taxes. Some sample life changes that will affect your taxes:

  • Starting a small business
  • Changing from self-employed to employee
  • Birth of a Child
  • Change in marital status (getting married or divorce)
  • Adopting
  • Getting a company vehicle or starting to use personal vehicle for the company
  • Significant salary increase or decrease
  • Starting to Invest
  • Alimony and child support payments

You can get information on these topics by visiting the IRS at www.irs.gov. Consider Adjusting your W-2 if you have significant changes.

Photo by Tam N.

What other tax saving tips do you have?  What do you do to help reduce your tax liability?

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1 Comment
  1. kenyantykoon

    many people dont even know about the deductions due to them and thus pay more than they have to and thus to tempted to evade. it was a good idea to point that you at the end of your post