No one wants to pay more than their fair share of income taxes. The experts at Pascarella & Associates can help you avoid overpaying but if you prepare and file your own return please consider the following advice.
Don’t leave Flexible Spending Account money unused and in the account. If you contribute to an employer-provided flexible spending account (FSA) for medical expenses or child care be sure to use up your funds by the yearly deadline. While an FSA is a good way to use pretax money on eligible expenses if you don’t use it by the deadline the unused portion becomes the insurance provider’s. Ordinarily you have until the end of the plan year to spend the money, although employers have the option of allowing a two-and-a-half month grace period. For example, if you’re on a calendar-year plan with a grace period, you may have until mid-March 2012 to expend your 2011 FSA.
Do you wear glasses? If so please consider make a new eyeglass purchase, (or contact lenses or other eligible medical equipment such as a blood pressure monitor) if you need to use up FSA money and don’t have more pressing medical issues. However it is important to note that as of January 1, 2011 you can no longer use the funds in an FSA to purchase over-the-counter drugs, with the exception of certain diabetic supplies, without a prescription. Your plan should provide a list of eligible expenses.
Don’t missing out on the gift tax exclusion. In 2011, you can give up to $13,000 ($26,000 if your spouse joins in the gift) to as many people as you like without triggering the gift tax. But you must use up the current year’s exclusion- you cannot carry it over to the next year. By gifting each year you can help reduce the size of your estate and reduce potential estate taxes. The current threshold is $5 million, so some of us don’t need to worry about estate taxes. But the current law is in effect only through 2012, and no one is certain what will
happen after that.
And, if you pay higher education or medical expenses on behalf of someone directly to the institution or provider, your gift is not limited by the annual exclusion amount.
Don’t fail to save for retirement. If you make pretax contributions to an employer-sponsored retirement plan at work, you’ll reduce your current tax bill and enjoy tax-deferred savings for retirement. If you put money into a traditional IRA, your contribution may be tax-deductible and your earnings grow tax-deferred. Because your account is not reduced by taxes each year, your money compounds faster than it would in a taxable account earning the same rate of return. We can show you some examples of how this works using real numbers.
Note- a Roth account does not allow pretax or tax-deductible contributions and won’t lower your current tax bill. But there are other tax advantages with a Roth, so talk to us about which tactic is better in your situation.
If you are a low- to moderate income taxpayer and you contribute to an employer-sponsored retirement plan or an IRA, you may be eligible for a tax credit for up to $1,000.
Make Tax Time Less Taxing – meet with Pascarella & Associates and we will show you how. Determining your best tax moves can be a challenge. If you are looking for trusted, personal tax services, consider Pascarella & Associates. To schedule a complimentary consultation call our Somerset NJ office at 732-247-8840.