As we’re all aware, this decade’s Great Recession has dealt, and continues to deal, a significant blow to the budgets of many American families, leaving millions in debt, underwater in their mortgages, and in some cases falling behind on their tax bills, adding to their economic unrest.
So, even though tax day 2012 is weeks away, and the holidays may already have your full attention, it’s worth noting that there are some timely tips you can take between now and Dec. 31 that will make a real difference when it comes time to deal with the IRS next spring. In part one of its two-part report, according to AOL’s DailyFinance, there are four moves that could benefit your bottom line, and keep the tax man at bay, on April 15.
Give More to Your 401(k)
If you can afford to have to set aside some cash savings and your monthly budget can take the hit, consider giving more to your your 401(k) contribution. As DailyFinance puts it, “The more money you put into these retirement funds, the less you pay in taxes now -- and the more you earn for golden years. Taxes are like sandpaper that grinds down your returns over time, says Sizemore: Every dollar you pay in taxes today is a dollar that can't be invested for growth. There are also secondary benefits, such as protection from creditors. In most cases, assets held in a 401(k) or IRA are safe from creditors' claims.”
Give More Away
If you’re feeling the urge to purge over your holiday vacation, clean out your closets, garage, attic to donate clothing and household goods to your favorite charity. Why now? “The IRS allows a deduction for the fair market value of all non-cash contributions that are in good condition,” said DailyFinance. “If you're planning on a larger than normal contribution to your favorite charity, do it before Dec. 31 to lower your taxes this year.” And be sure to get a receipt for your tax records!
A Charitable Loophole for Mature Americans
This season, savvy seniors can also reap significant tax benefits even without itemizing. “A little-known tax planning tip involves charitable contributions for people over 70½ years old. Many senior citizens have no mortgage interest to pay and don't have enough deductions to itemize. So typically, they would receive no tax benefit from their charitable contributions. However, those over 70½ years old can direct part or all of their required minimum IRA distribution (up to $100,000) directly to a charity tax-free. Even though they aren't itemizing their deductions, they'll reap the tax benefit of not reporting the donated distribution as income, says Joseph Arena, director of tax and business services for Brighton Securities.”
Remember, Bankruptcy can discharge some or all of your taxes
Depending on when your taxes were incurred, some (or all) of the taxes might be completely dischargeable in bankruptcy. That means, just like your credit card debt, it can be wiped out under the powerful provisions of the bankruptcy code. Even if the tax debt is not dischargeable, a Chapter 13 plan can help you structure an affordable repayment plan, often on terms much more favorable than the IRS can offer.
And remember, if you’ve been impacted by the economy and are wondering how to free up more money to pay your taxes, knowing a qualified bankruptcy attorney can also help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future. The bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-888-234-4181, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.