Taxes…Yay…. “Only the little people pay taxes” - Leona Helmsley, hotelier and prison inmate As the title suggests, it’s getting to be that time of year for tax planning and some people are very excited. I have yet to meet any of them, but I am sure there are tens of people all across the country that throw tax parties with techno music and 1040 forms all night long. Yay for them…boo for the rest of us. To help organize and prepare ourselves for the tax filing season, below are some tips that can get us prepared for our unwanted family partner, Uncle Sam. Pay as you Go The US tax system is based on a system where you pay your taxes as you earn them. That is why you have federal withholding taken out of your paycheck. If you own a small business, the equivalent is the quarterly 1040-ES payments you make. The idea is that you pay what you think you owe as you make it and the tax return is the reconciliation at the end of the year. If you paid Uncle Sam too much, you get a tax refund. If you paid too little, you pay more with your tax return. Preferably, you want to not owe any money with your tax return because Uncle Sam may charge you interest and penalties for not paying it throughout the year. You also do not want to get a big tax refund back because that just meant you were paying too much throughout the year and let the US government have your money through the year interest free. If you find that you are paying too much or too little in taxes, you can adjust your federal withholding by requesting a W4 form from your employer. Receipts – How Long? The length of time you should keep a document depends on the statute of limitations for amending that tax return or how long the IRS has to assess additional taxes. Depending on the record, you would need to keep your records for 3 – 7 years. To be safe, I would suggest keeping all your records for 7 years. Keep in mind, if you file a fraudulent tax return (if this is not obvious, this is bad so don’t even think about it) you will have to keep your records indefinitely. IRA and TSP/401k Deductions If you have the terrible problem of making too much money, that means you may owe a lot in taxes. I would consider making an IRA contribution (if you qualify) or increase your 401k and/or TSP contributions. These contributions can decrease your AGI (Adjusted Gross Income – please throw this phrase around if you want to get invited to the techno 1040 parties mentioned in the opening paragraph) and thus lower your taxes. 100 Mile Drill Deductions Most of us know that you can deduct your expenses for drill weekend such as meals, lodging, mileage, parking, etc… However, this is usually limited to the Miscellaneous Deductions and you have to itemize your deductions. If you understood the entirety of that last section, you are probably reading this from an insane tax techno party. For the rest of us, just know that it means you may not be able to deduct your drill deductions, and if you were able to, you would not be able to deduct the entire amount. However, if you are over 100 miles away from your drill location, you may be able to deduct the entire amount even if you do not itemize. For more information, please contact us or read more at this link: irs.gov/instructions/i2106/ch02.html Tax Preparation Software Starting around February, Military OneSource (militaryonesource) will provide free tax preparation software for service members. They will not charge you any fees to prepare or electronically file your taxes for state and federal forms. The software is a great tool because it is formatted to ask military service questions such as non reimbursed drill expenses. Military OneSource also will have tax consultants that you can call if you are having issues or questions about your taxes. To serve our Military Members, California has been split into 3 regions, North, Central and South. Together, TEAM CALIFORNIA, Your Team of Personal Financial Counselors is ready to begin to help you to reach your full financial potential. Taking the leap from Financial Frustration to Financial Freedom can be supported with the services of your Personal Financial Counselors (PFC) that are provided to you by your JFSAP team of Personal Financial Coaches. You now have access to a full time PFC anywhere you are in California: Northern California PFC, Kristy Tubbs: [email protected] Central California PFC, Darryl Jones: [email protected] Southern California PFC, Hong Tran: [email protected] Take control of your Financial Freedom today, use your resources that are being provided to you and plan to live your future relieved of the stress of worrying about your finances! Hong Tran is your Southern California PFC and would be happy to help you achieve your dreams and goals. [email protected]
Posted on: Mon, 02 Dec 2013 18:50:16 +0000