Tax time nears
Published 11:44 pm Wednesday, December 21, 2011
It’s everyone’s least favorite part of the winter, but there’s time to prepare for it right now.
After the Christmas decorations are put away and the new year is rung in, people have to turn their attention toward their taxes.
But there are still a few things you can do in the next week or so to help improve your tax situation when April 16 rolls around — the dreaded 15th is on a Sunday this year.
Chris Robinson, a certified public accountant in Suffolk, said some of the easiest things to do are to make charitable donations or max out your retirement savings.
“Somebody could play catch-up in the next week if they haven’t been making those contributions,” he said.
The maximum yearly contribution to an Individual Retirement Account is $5,000, or $6,000 if you are age 50 or older. For a 401K, the limit is $16,500, or $22,000 if you are age 50 or older.
Robinson reminded people who made Roth IRA conversions in 2010 and chose to defer paying taxes on the conversion that the bill comes due this year and next year.
“There was a special provision in 2010 laws that allowed you to spread the tax over two years for ’11 and ’12,” Robinson said. “Some people may have forgot that tax bill is coming due.”
Also, people can make charity donations in the next week to reduce their tax liability.
“It’s better to accelerate those into this year and go ahead and get the tax deduction,” he said.
Another thing Robinson recommended is seeing if it’s possible to claim as a dependent any family members that you have been supporting.
“That’s another thing that might be real interesting in these times,” he said. “A lot of people have been providing a lot of help to family members.”
Robinson said a person is eligible if you are providing more than 50 percent of their support — not just direct cash payments but also providing housing, groceries, clothing and other such expenses.
“The key is the amount of support you provide for them,” he said.
One final tip from Robinson for business owners — an asset purchase this year can be written off fully in this tax year, as opposed to normal provisions that only allow writing it off during a period of several years. The full write-off provision expires this year, though.