One Taxing Summer

Taxes. There, we said. Right in the middle of the dog days of summer, we had to go and mention the tax days of April. When you think of Uncle Sam and the bite he takes out of you each year, does August create any real kind of urgency? Doubtful. August is just another hot, summer month with taxes a holiday season and spring thaw away. But when it comes to efficient tax preparation, it’s never too early to do some pre-emptive tax planning.

Why wait until the last minute to tackle such an important financial task? If you get started now, the challenge won’t be so daunting when the real hysteria sets in. So what can you do to get a head start? Let’s take a look...

Dial Back the Refund
If you received a big refund last year and liked it, step away from the W-2. This simply means you gave Uncle Sam a tax-free loan. Too many people see a big tax refund as a good thing, a forced savings plan. But the return on the overpaying-your-taxes investment is ZERO. You want to come out as close to even as possible when it comes to paying taxes. This could mean changing your withholdings, but it’s easy to do. Just drop by your payroll office and submit a new W-4. For more information on tax withholdings, click here.

Happy Camper
If you’re a parent, you’re very likely aware of the child and dependent care credit that helps cover day care expenses. But what about those days at summer camp during summer break? You’ll have reason to like the IRS here as they allow you to cover day camp costs under your childe care credit claim. Just remember to keep those receipts!

A Sorted Tale
Remember the great receipt hunt last year? You were pulling your hair out trying to find proof that yes, you DID donate $500 to Save the Lemmings. Avoid that this year by getting organized now. Develop a system that allows you to file all those business expenses, medical bills, charitable donations, etc., in a way that will make it easy to find whatever you need come filing time.

Charity Begins Before Tax Time
Before we start in with the idealistic feel-goodness of charitable giving, please note that your friends at the IRS now demand documentation for every monetary charitable gift. That being said, giving to a charity now helps out just as well as holiday giving, many times even more so. It reflects on your taxes the same, too. Just remember to organize those charitable giving receipts in the new filing system you created!

Work Stoppage
Retirement looms, sooner for some than others. When it comes to saving for the Golden Years, the sooner you contribute, the better. Do you have an IRA? How about a 401(k) at work? The money you contribute for traditional IRA and 401(k) plans comes out of your paycheck before taxes are calculated, providing you with a tax break. If you already have an account, increase your contribution amount.

House and Home
The down economy has created one bright spot—interest rates on home loans are at near-historic lows, and being a homeowner has tax advantages. Now’s a good time to buy that home you’ve been thinking about as there are bargains to be had and low rates of which to take advantage.

Looking Rather Green
Already have a house? Making it green (more energy efficient) could help out come tax time by saving you some green. Although the home energy efficiency tax credits are still around for 2011, they’re not quite as generous as years past (maximum claim is now $500). But every little bit helps, right? And going green is a reward in and of itself for many. Please note: if you already claimed an energy tax credit between 2005-2010, you’re no longer eligible for this break. BUT, if you decide on a bigger project, such as solar energy, wind power or geothermal systems, you could receive a tax credit equal to 30 percent of the cost, with no cap on credit amount.

Planning Ahead
Now’s a great time to seek tax help if you need it. With the major crunch of tax season over, experts have more time to dedicate to you and your questions. It also gives you time to come to a decision on exactly what and who you may need to help you and your tax situation.

When it comes to taxes, we rarely think of a pleasant experience. It’s easy to put things off, but if you put a little effort into getting things in order earlier or taking advantage of what uncle Sam offers via credits, when the stress of tax times does arrive, you’ll be ahead of the game. And remember, Vantage members get tax preparation breaks via TurboTax.