Learn Lessons For Next Tax Season
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The taxes for 2009 have been filed, but it's never too early to learn how to pave the way to a lighter tax bill next April. NY1's Money Matter reporters Tara Lynn Wagner filed the following report. It may feel like you just filed your taxes yesterday, but certified public accountant Don Robinson says now is actually the best time to start thinking about next year's return.
"This is when your accountants are not tired, they're not rushed to get your tax returns and everybody else's done, so they have more time to take with you," says Robinson.
That is especially important for taxpayers who were in the unexpected position of owing Uncle Sam, a position CPA John Vento says could easily be avoided.
"The reality is that is not a problem with the tax system, it's not a problem with the tax preparer. Quite frankly its simply [taxpayers'] own -- I hate to use the world 'negligence,' but their failure to do a little proper planning ahead of time," says Vento.
One simple step could be to revise one's W-4 form, which dictates how much of a salary is withheld for taxes. While most people fill this out once and never think of it again, accountants say it should be revisited whenever there's a change, like when one gets married, has a child, or has a spouse who stops or restarts working.
"It really will cause you to owe if you put down 'married' if both of the spouses are working. So it really means, 'Put married down when I'm married and my spouse does not work,'" says Robinson. "If you are both working, you need to check the box 'married' but withhold at the higher single tax rate."
Even without life changes, those who owed money for 2009 will want to adjust their withholdings as soon as possible to ensure not ending up in the same boat next April.
Ask the company personnel department about available flexible spending programs that allow payment for transportation or medical bills with pre-tax dollars. This will lower one's take-home pay but also one's tax burden, saving money in the long run.
"If you're in a 40-percent tax bracket and you manage to obtain $1000 worth of benefits on a pre-tax basis, well that's $400 you just saved," says Vento.
Finally, while everyone likes to get a big refund, CPAs say that is not ideal either. In fact, they would prefer making a few tweaks to get taxpayers as close to zero as possible.
"You don't want to get a tremendous refund, because if you do that what you are really doing is giving the government an interest-free loan with your money. And there are much better things we can do with your money then give the government an interest-free loan," says Vento.