Tax return

5 Last-Minute Tax Return Tips You Need to Know Now

Tax Return

If you are the kind of person that likes hot tips on anything, you will certainly enjoy the tax refund tips in this article as they will help you to reach the financial freedom that eludes so many people. Be forewarned that since tax laws are constantly changing, tax tips must also constantly change due to the never-ending tax law changes.

The tips include:

  1. Current Tax Implication

When you are deciding where to place your purchased securities such as in a taxable account versus a tax-advantaged retirement account you need to be mindful of the current tax implications. For instance, Bond interest payments that you receive are taxedas ordinary income rates, up to 35%, which is usually higher than the long-term capital gains rates of 15% right now but could increase to 20% in 2013. Therefore, you would place taxable bonds in a tax-deferred account, and you would place equities in a taxable account. In the case of tax-free municipal bonds, you could place them in a taxable account due to their tax-free nature.

  1. Final Quarter

The final quarter of the year is a good time to “harvest” investment losses. If you have gained in your portfolio that you have to pay tax on, this is a good time to get rid of your losers to offset the gains. You can offset all your gains with losers plus an extra $3,000.00 more. If you have even more than that in losses, the amount over $3,000.00 is carried forward to use the following year. If you are in love with some of your beaten down securities and feel strongly for their future, sell the security to reap the loss and wait 30 days to buy them back on day 31. If you buy them back during this waiting period, the I.R.S. will disallow the deduction with the so-called “wash sale” rule. That’s their way of saying “no way” you cannot sell a security to capture a loss and buy it right back to pick up where you left off.

  1. Home Office Deduction

People get into trouble trying to use a home office deduction simply because they do some work from home. The I.R.S. is very clear on when you can deduct a certain percent of your overall home expenses to reflect the “office” portion of your home. You need to be self-employed, and this has to be the primary place where you meet and deal with clients or patients. This deduction is so often misused that it often triggers an audit.

  1. Lottery

For your lottery players, did you know that you can deduct your gambling losses, but only to the extent of your gambling wins, so keep good records especially if you like to go to the casino.

  1. Audit

Some people like to keep records for seven years or more. In reality, the I.R.S. has up to three years to audit you, but you should keep your records for six years because that is how far the I.R.S. can go back if they feel you underreported your income by 25% or more.

CONCLUSION

As stated earlier, tax laws are constantly changing so it would behove you to watch out for future tax tips as your financial freedom will be dependent upon it. The reader is advised to check with their tax professional to see how these tax tips affect their own situation. for more info: http://www.taxreturn247.com.au