As the calendar year wraps up and draws to a close, there have been a flurry of final year-end developments and many of them related directly or indirectly to your income taxes.
After more than a year, Congress will soon confirm John Koskinen as the new IRS Commissioner. This has been the longest gap between confirmed commissioners since 1862 when the job was created. Koskinen, the former chairman of Freddie Mac, the U.S. owned mortgage financier and leader of the federal government Y2K project, has a reputation for turning around troubled enterprises. While he doesn't have a tax background, he does understand the challenges of making the IRS a more efficient organization.
Equally as significant as confirming a commissioner, the House has passed a budget making a government shutdown less likely. The Senate, where there is wide support for the bill, will soon vote and if passed avert a government shutdown. This is good if you're expecting a tax refund this year, as there will likely be no further delays to the start of the season. As you may recall with the last government shutdown, tax refunds were suspended from being issued until government was back up. A big headache last time, likely avoided this time.
The IRS announced this week that they will start processing tax returns on Friday, January 31, 2014 -- and maybe even a bit before -- but taxpayers can start as early as they are ready and have all of their documents ready. So what can you do in these final few days of the year to help lower your taxes for 2013?
Pre-pay certain January bills - Paying your mortgage payment and any medical bills now instead of in January can increase your itemized deductions. Paying your winter tuition bill before January can increase your education credit or deduction. Paying your January student loan interest payment before year end can increase your student loan interest deduction. Pay your final state estimated payment before January 1, 2014 and include it in your itemized deductions for this year.
Make a year-end charitable contribution - There is still time to donate money or goods to your favorite charity. If you are donating used household goods, remember to keep a list of the items you donate, their fair market value, the date of the donation and the location where you donated your items.
Contributions to retirement plans and IRAs - Make a catch-up contribution to your retirement plan at work before the end of the year. And don't forget the IRA contributions. You have until April 15 to make a contribution to your IRA, but make it now so you don't forget.
Distributions from IRAs - Are you 70 ½ or older? Don't forget to make your required minimum distribution from your IRA before the end of the year. You can still direct your IRA administrator to make a direct contribution to your favorite charity from your IRA and count it as part, or all, of your minimum distribution for the year. Not only will you help your favorite charity, but this type of distribution is tax-free this year.
It is hard to believe that we are about to wave 2013 goodbye and start a new year and a new tax season. But hey, for many, that's a good thing! As I have commented before, with 75 percent of taxpayers historically receiving a tax refund each year, and likely this year as well, and with each federal refund averaging about $3,000, what is so bad about filing your taxes?
File your tax return early and get that refund, and enjoy it.
