To that end, I recommend the following bits of tax advice, sure to skew the tax rules in a direction that will be helpful on your own personal tax return:
1. Don't over-report income. Okay, I know this sounds like a no-brainer - who in his right mind would report more income than necessary on his tax return? Actually, plenty of people would do that, and not even know it. If you receive payments in January, 2009, payments from your employer, checks for contract work that you performed, or income from other sources, you are not required to pay tax on that income on your 2008 income tax return. But chances are good that the payor wrote the check to you in the last week of December so that he can take a deduction for the payment on his 2008 income tax return. Check your 1099 forms and other tax documents reporting income. If you didn't receive the amount reported on the form until after the first of the year (keeping the check in an envelope that you don't open until after 12/31/08 doesn't count), you are not required to report the income on your 2008 tax return, no matter what the 1099 or other document states. Just remember, a year from now, any amount you used to reduce the 2008 1099 will need to be added to your 2009 income.
2. Improve your cash flow. It's January. April 2010 is a long way off, and who knows what might happen to your tax situation for 2009 between now and the end of the year. Get a copy of a W-4 form (click the Form W-4 link here: http://www.irs.gov/), and change your federal income tax withholding so that you start the new year with a higher take-home pay. Be ready to reassess next fall and see if you need to increase your withholding near the end of the year so that you can meet your tax liability. A good rule of thumb is that if you get a refund this April, you're on the right track with your new, lower withholding. If you owe taxes in April, you'll probably want to increase your income tax withholding as the year progresses.
3. Keep the tax angle in mind. If you're going to spend money anyway, try to make your spending tax-deductible. Helping out at the church or local charity? Make sure you get a receipt for the money you spend. If you're purchasing items to help with a repair or improvement project and worry about using your Office Depot receipt as evidence of a charitable tax deduction, give the money instead directly to the charity, get a receipt for your contribution, then have someone with the charity checkbook write the check to Home Depot. Don't discard when you can contribute. Before you haul items to the trash, see what is useful and donate the items to charity in exchange for a receipt and a tax deduction. Just keep the idea of tax deductions at the back of your mind all year long and make the tax laws work for you.
We're in a new year and we have a fresh slate in terms of creating our 2009 income tax return. Keep taxes on your mind and before you know it, your life will be revolving around the tax effects of your actions, instead of playing catch-up when April 2010 rolls around.
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