ill additional Health Care Reform laws be delayed? Will student loan rates get a permanent fix from the recent doubling of interest rates? While we wait for these answers, the 2013 tax year steams into the dog days of summer. This month’s newsletter provides some ideas to help reduce this year’s tax bite, discusses a recent error in IRS announcements, and provides some hints on becoming a smarter renter.
As always, should you know of someone who may benefit from this information, please feel free to forward this newsletter to them.
Oops. You Owe the IRS More Interest
|How do I know? The incorrect notices were sent in early July. Notice dates prior to and after July 2013 should be correct.|
|New Notices. The IRS has stated they will be sending out corrected notices to affected taxpayers.|
|What should you do? Since your incorrect notice will not be labeled as such, what should you do? It is always best to respond to IRS notices in a timely fashion. So respond to the notice as appropriate using certified mail. Corrected payments can be made at a later date.|
Becoming a Smarter Renter
|Follow the terms. Be the tenant that pays a little early, not the one that always pays late. That way if you ever need a little extra time to pay, you have established the necessary trust to do so.|
|Pro-active disclosure. If you think you will need a temporary exception to part of the lease, try to include it in your upfront negotiations. If this is not possible, consider pro-actively disclosing the exception to your property owner. This will help build trust and a reputation as being a good tenant.|
|Keep the property clean. This is especially important if you have a pet in an apartment. When landlords come into your apartment, you will build confidence if the place looks like you treat it as if you owned it. The same is true with rented equipment. Always return it cleaner than you received it.|
|Know the owner & neighbors. Building a relationship with the property owner and your neighbors helps. If your neighbor has a problem, wouldn’t you rather have them come to you than to your landlord? Establishing a good working relationship with a landlord will help you when you need something out of the ordinary or you are in need of support with a problem in your apartment or with the equipment you rent.|
|Leave with a smile. This is especially true for apartment and vacation rentals. When you leave, have the property cleaned and hassle free for the landlord. Request a reference from the landlord for future rentals.|
Taxes are up. What Can You Do?
|Tax rates are up. Itemized deductions and personal exemptions are being phased out. Long-term capital gains and ordinary dividends maximum tax rates are up 5%. What action can you take to reduce the potential tax bite? Here are five ideas.|
|Take full advantage of capital gains tax law. Remember losses on investments can be used to offset any investment gains. The best-case scenario for tax savings is to offset losses with short-term capital gains that could be taxed as high as 39.6%. In addition, you may take up to $3,000 in excess losses against your ordinary income.|
|Maximize Tax-deferred Retirement Savings. Numerous retirement plans allow you to defer paying income taxes until funds are withdrawn. Primary examples are 401(k)s, Individual Retirement Accounts (IRAs), and 403(b)s. The pre-tax money you contribute reduces your taxable income this year. Funds are not taxed until you withdraw the contributions, usually during your lower income retirement years.|
|Consider Utilizing Home Equity. Interest on most debt, except home mortgage interest, is no longer tax deductible. But since interest secured by your primary home is deductible, you can often leverage the equity in your home via a home equity loan and deduct the interest expense. This can effectively move non-deductible interest to deductible interest. Some caution should be taken here as non-payment could put your house in jeopardy. Limits apply.|
|Shift income and expense. Remember for most of us, taxes use the cash versus accrual method of reporting. That means your income and deductible expense is based upon when you receive the funds or when you pay them. So pre-paying an obligation due the following month can move that expense into the current tax year. Delaying receipt of a bonus from December to January will lower your income in the current year.|
|Take advantage of tax credits. The bad news? There are thousands of pages in our current tax code. The good news? Included in those thousands of pages are numerous tax credits that can reduce your tax obligation. From Child Credits to Foreign Tax Credits, the options are vast. Understanding them all is almost impossible, but a quick planning session could help identify some tax savings opportunities for you.|
Should you wish a review of your situation, please call.
I Need a Copy of My Tax Return
As always, should you have any questions or concerns regarding your situation please feel free to call.