Sure, Halloween decorations have been in the stores since Labor Day, but before you put on your costume, let’s observe October 15. After all, it is Global Handwashing Day (thumbs up for good hygiene!) and arguably the second most important tax day of the entire year for so many reasons.
First of all, tax season 2012 officially ends October 15 because it is the deadline for taxpayers who filed an extension in April. This year, October 15 also starts the 99-day countdown to January 22, which is the first day taxpayers can e-file their 2012 tax returns.
- Choose tax savings options via open enrollment
- Take steps to lower your 2012 tax bill
- Understand how IRS processing delays in January could impact when you get your tax refund.
Opt for open enrollment elections that can be tax savers
If you’re making health benefit decisions at open enrollment at your workplace, consider opening a health savings account or a flexible spending account. These accounts can reduce your tax liability while also providing funds to pay for medical expenses. Interesting fact: Less than 20 percent of those who have access to these accounts use them, subsequently missing out on tax savings.
By contributing $2,000 to one of these accounts, a married couple making $80,000 can save $500 on their tax bill.
Here is a brief description of how these plans work and how they differ:
- Health savings account– contributions can stay in the account indefinitely, allowing the account holder to save for future medical needs
- Must be coupled with high-deductible health plan ( e.g., at least $1,200 deductible for self-only coverage) and plan must not pay benefits until deductible is reached.
- Flexible spending account – must use the funds by the end of the plan year or grace period, or lose them; an FSA is not for long-term savings
- Up to $5,000 is withheld from gross income (pre-tax) and then paid out as a reimbursement for qualified medical expenses.
Make money-saving moves to potentially decrease your 2012 tax bill
Two common ways to reduce tax liability at the end of the year are to contribute more to retirement accounts and make more charitable contributions.
If you have not contributed the maximum to your 401(k), consider increasing contributions for the remainder of the year; contributions are made pre-tax, which reduces taxable income and potentially your overall tax bill. Also, if you’re eligible to deduct IRA contributions, you can make traditional IRA contributions to decrease your 2012 income until the April 2013 filing deadline and thus reduce your tax liability on 2012 tax returns.
It’s important to remember that for charitable donations to be tax-deductible, they must be made to qualified, tax-exempt organizations (IRS-approved nonprofit religious, educational or charitable groups), and claimed as itemized deductions on tax returns. The Salvation Army donation guide or H&R Block’s DeductionPro can be used to estimate the value of non-cash items.
Plan ahead for the delayed first day to e-file in 2013
The first day to e-file in 2013 is January 22, which is about a week later than in recent years. For this reason, if you typically file in January and get your refund before Groundhog Day, you may not receive your refund until closer to Valentine’s Day. Planning on how to manage this delay in cash influx could help not just in the short-term, but also unearth better financial strategies for the future.
Want help before January 22? You’re in luck because 4,000 H&R Block offices are open to offer advice, answer tax questions, make appointments to prepare tax returns and provide free Second Look® reviews to ensure you receive the maximum refund possible. This offer is good at participating offices through December 31 for the review of 2010, 2011 and 2012 income tax returns not prepared by H&R Block. All 11,000+ H&R Block retail tax offices will open January 7.
Understanding your tax situation is something some people figure doesn’t really matter because of a fatalistic “it is what it is” mentality. You can’t magically make your issues disappear, but there are some steps you can take that can mean more money for you to do the stuff you really want to do – instead of overpaying what you owe in taxes.
So let’s celebrate October 15 by giving some thought to your taxes. And please, wash your hands.