As we enter tax season, it's good to remember that the 2013 filing deadline for 2012 returns is coming up within a couple of months here, on April 15th. While it may seem like it's still a long way off, it's a good idea to get started on your taxes now, and avoid problems down the road.
Here is some tax filing advice for 2013 that we would like to share to help you get started:
1. Collect Your Paperwork Now
Start collecting all your deduction and expense paperwork so you are ready to start filing when you receive your W-2s in the mail. All financial institutions have until January 31st to mail out W-2s and other tax forms, so you should have already received your forms in the mail. If not, you should either get in contact with those companies to find out what the hold up is, or expect to receive them soon.
2. Consider If You Will Need An Extension and File For One Early
File for an extension now if you foresee that you will not be able to file your taxes in time. The form necessary to file an extension is Form 4868 and it will grant you 6 more months to get everything in place.
If you have children that are not subject to the “kiddie tax” and fall in the 10% – 15% tax bracket, you can gift shares of appreciated stock to them. Your children won’t get taxed on capital gains as long as their total taxable income doesn’t exceed that 15% tax bracket.
For more information regarding taxation on a child’s investment income, please see the IRS website.
4. Consider Deducting “Start-Up” Costs For Your New Business
If you just started a small business, you can deduct “start-up costs” as long as they were incurred before the day of your first active trade. These costs can be deducted over 180 months and you can choose to deduct the first $5000 in your first year of business. Typical costs may include investigatory costs towards the creation and acquisition of your business, and set-up costs like employee wages and training. Actual equipment purchases fall under another set of rules and can be written off through depreciation income tax deductions. Please note that incorporation expenses cannot be deducted as start-up costs.
5. Get Help If You Need It
Do-it-yourself tax software can be helpful but it is not a substitute for having someone check that you filed your returns correctly. If you think you might need in depth assistance, don’t be afraid to ask for help from a tax professional. The laws change all the time and a professional can help you to file correctly and help prepare you in case of an audit. For DIY tax software, you can read client reviews and opinions to determine whether your needs match those of other satisfied customers that used the software in the past.
For more information on tax and investing tips, please visit the Nerdwallet Investing blog. This post was written by Neda Jafarzadeh, a financial analyst with NerdWallet Investing. NerdWallet helps consumers make better financial decisions and compare total costs to find the best online broker for their needs.