New Year, new challenge: Tax filing season
- December is not too early to start organizing documents for tax filing
- Charitable contributions due by Dec. 31 to count for 2014
- Special rules apply for donations of boats, cars or planes
LITTLE ROCK – The new year brings a new challenge for consumers: tax filing season.
Laura Connerly, assistant professor for the University of Arkansas System Division of Agriculture, said “there are steps you can take now to start preparing for tax season, and maybe even save a little more on taxes.”
Connerly has a few tips to consider before tax season arrives.
Maximize retirement contributions:
- Make additional contributions to your 401k or 403b before Dec. 31, 2014. These contributions are usually tax deferred. Contributions made in 2014 are not included in your taxable income. “So your income tax will be figured on a lower amount,” she said.
- Start or contribute to an Individual Retirement Account. Traditional IRAs are tax deferred. “You can make these contributions up to April 15, 2015, and count it for the 2014 tax year. Limits are typically up to $5,500 per tax filer or $6,500 for those over age 50.
Give to charities. Many people give to charities throughout the year. “You have until Dec. 31, 2014, for your charitable contributions to be counted as an itemized deduction for the 2014 tax year,” she said. “To take the deduction, you must itemize your deductions using IRS form 1040A.”
- Follow the rules for qualifying deductions, which can be found at www.irs.gov.
- The recipient must be a qualified charity. “You’ll need a receipt or letter of acknowledgement if the donation is more than $250,” Connerly said. Verify donations under $250 with the cancelled check or a bank statement showing the contribution. Special rules apply to the donation of a car, boat, or airplane.
- Check out the charity at the Arkansas Attorney General’s database: www.arkansasag.gov/charity. All charities that solicit donations in Arkansas must register and file annual informational returns with the Attorney General. Check the database before you donate to make sure you are giving to a reputable charity. You can also see how much of your donation goes to administration or fundraising costs.
Organize for tax filing. “If you haven’t already done so, now is a good time to start organizing your tax documents so you won’t have to scramble at the last minute,” Connerly said. ”If you’re planning to itemize, this will include amounts paid for childcare, charitable donation receipts, medical and dental expenses and other deductible expenses.”
- Set up a folder or envelope to collect incoming tax documents. Organizations will soon begin sending year-end tax documentation such as home mortgage interest statement, interest income, and W2s. Some charities send letters of acknowledgement of donations you’ve given throughout the year. As you receive statements in the mail, place anything related to taxes in the folder or envelope you prepared.
- Consider your filing options. Tax filers making less than $60,000 in 2014 can use IRS Free File. For a faster refund, submit taxes electronically and have any refund deposited directly into your bank account. Free options for filers who need assistance are Volunteer Income Tax Assistance, or VITA, for filers who made less than $53,000, and Tax Counseling for the Elderly, or TCE, for filers aged 60 and older. To locate the nearest VITA or TCE site near you call 800-906-9887 or use the VITA Locator Tool at http://irs.treasury.gov/freetaxprep.
For more information about managing your finances, contact your county extension office or visit www.uaex.edu.
The Arkansas Cooperative Extension Service offers its programs to all eligible persons regardless of race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
By The Cooperative Extension Service
U of A System Division of Agriculture
Media Contact: Mary Hightower
Dir. of Communication Services
U of A Division of Agriculture
Cooperative Extension Service