Taxes are a constant every year. But in this big election year, a number of key tax incentives are set to expire. With just two short months before year end, now is the time to get a solid game plan in place for your 2012 tax filings, and 2013 tax strategy.
Here are a few tips to get your preparation started.
Income tax withholding. The current 2 percent payroll tax holiday is scheduled to expire after 2012. Review how much federal income tax is being withheld from your pay: Too much? Too little?
Gifts. Don’t overlook gift-giving as a tax-saving vehicle. Big changes are in store on this front for 2013, including a significant reduction for lifetime gift tax exclusions (on sizeable gifts).
Charitable giving. ‘Tis the season for charitable giving as a year-end strategy. Know the deadlines for making or postmarking fiscal/tax year contributions to your favorite nonprofit or charity.
New taxes. The new year triggers two new taxes. Health care reform legislation, The Patient Protection and Affordable Care Act (PPACA), imposes an additional 0.9 percent Medicare tax on wages and self-employment income and a 3.8 percent Medicare contribution tax. Consult with your tax professional on how this change may impact your personal situation.
Employee benefits plan changes. Currently, many employers with health care Flexible Spending Accounts (FSAs) have an ability to limit contributions made via salary reduction agreements to between $2,500 and $5,000. Effective in 2013, the health care law requires employees with FSAs under “125” or “cafeteria” plan types to limit their contributions to $2,500.
Need guidance? If all of this is overwhelming, a call to your accountant or tax professional might be in order. Their counsel can aid in charting a strategy for successful navigation of your personal financial and tax planning.
Also, before the rush of the holiday season, get a jump start on pulling together your key year end financial and tax related documents. The following represents just some of the items you’ll need to pull together in one place:
- Receipts, statements for itemized tax deductions (mortgage interest, student loan interest, charitable contributions, dependent’s care expenses statements, etc.)
- Documents related to employment compensation (i.e. W-2)
- Investment portfolio statements
Don’t wait. An ounce of prevention is worth a pound of cure, as they say. Plan now so you don’t have any unwanted surprises later when it comes to your finances.