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Every Day is Tax Day
The MMI Online Articles are designed to inform, assist, educate and alert consumers.
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When most people think of tax time, they think of April 15. However, in reality, every day is tax day—April 15 is simply the day by which you must report your actions. While income tax preparation may not qualify as a recreational hobby, a little planning throughout the year can save you time and money.
For starters, you can estimate your taxes now by visiting www.irs.gov. Starting early is particularly important if you think you might owe the IRS. Calculating your taxes now doesn’t mean you have to file before the deadline, but it does give you time to prepare for the results. On the other hand, if you are expecting a refund of more than $100, you might want to reduce your withholding amount. Getting a tax refund is never a good thing because what you’re doing is extending an interest-free loan to the federal government.
This time of year, tax payers should also:
- Research any tax law changes at www.irs.gov.
- Keep organized records. On average, one-third of the nation’s taxpayers itemize their deductions. Costs for things like medical expenses and child care may be deductible, so save those receipts.
- Make charitable donations. Most charitable gifts are tax-deductible if made to a qualified organization. But be sure your organization meets IRS guidelines as there may be different tax breaks when you donate certain types of assets to charity. Also be aware that under the new Pension Protection Act, donated items must be in good condition.
- Check the status of your tax-free flexible spending account. If you have money in your account, you must use it by the end of the year.
- Plan for retirement savings. Fortunately, you have until April to contribute to an Individual Retirement Plan (IRA). The maximum contribution for 2006 is $4,000.
- Buy or sell stocks. Investors should meet with a tax advisor to determine whether to sell or purchase stocks.
- Make any planned monetary gifts by the end of the year. For the 2006 tax year, taxpayers may make gifts of up to $12,000 per person and exclude the amount from the gift tax.
Finally, taking the time to do your taxes properly will reduce your chances of hearing from the IRS. In fact, according to the IRS, inaccurate math and incorrect Social Security numbers are among the most common mistakes. If you have a problem or a question, the IRS is there to help. Visit their Web site or call their toll-free customer service number at 1-800-829-1040.
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