08/10/2012 02:24 pm ET Updated Oct 10, 2012

Why It's Important to Conduct a Mid-Year Tax Review Now

Summertime means beach, barbeques and much needed vacation time. Probably the last thing on your mind is your taxes. Yet this is the perfect time to review your tax situation and determine what money-saving moves could and should be made for the remainder of the year. With the year more than half over, you can still take actions that will improve your tax position when it comes time to file your 2012 income tax return.

Over the next few months leading up to the presidential election, you are likely to hear a great deal about taxes, tax changes, proposed changes and even retroactive changes. It will be important to pay attention to your current situation and the changing environment for your personal taxes. However, the key to making sense of all of this will be knowing where you stand right now -- something that can be easily done through a mid-year review.

Taking a look at your financial activity for the year to date can help provide a better sense of what you can expect for the rest of the year. Keep in mind that as you look forward, you should also evaluate your projected tax burden and review ways to reduce any taxes you may owe.

Here are some mid-year tax saving tips to help you get ahead:

1. Check your withholdings - Now is a great time to review the withholding amount listed on your paycheck and to make the proper adjustments. If you are self-employed, evaluate your activity so far this year and any estimated payments you have made to date. You or a local tax preparer can help put together an estimated projection for 2012 and evaluate, even at this early time, what your tax filing may look like at the end of this year;

2. Evaluate your savings - Look for ways to participate in tax-free savings opportunities. Many companies offer a 401(K) program, which is a helpful way to save and reduce your taxable income. The current maximum contribution amount is $17,000, but if you are 50 or older, you can increase your contribution by an additional $5,500. Another way to save is to start contributing into an IRA. A traditional IRA may lower your taxes today, while a Roth IRA will help keep taxes lower when you retire and start drawing money out. There is still plenty of time to take some tax benefits and save for the future, but time is growing short for this year;

3. Use It or Lose It - If you participate in a company-sponsored cafeteria plan for healthcare benefits or dependent care expenses, be sure to know the balance in your account and do not leave an unused balance at year end. All expenses need to be incurred before December 31 of the calendar year and it is "use it or lose it" regarding money put aside; and,

4. Save your receipts - Provisions such as the tuition and fees deduction, educator expense deduction, state and local sales deduction, and mortgage insurance premium deduction expired on December 31, 2011, and are currently not available for 2012. Congress may extend these provisions one more time, even retroactively, so keep your receipts and any other supporting documents.

A mid-year consultation with a professional tax preparer can help you make adjustments now and to take advantage of applicable tax benefits. It will also assist you in determining the right course of action for the remainder of the year, and give you plenty of time to act on the tax preparer's recommendations.

Finally, by doing a tax check-up and assessment, you will be more familiar with your individual situation and will be better prepared to understand the implications of all of the proposed tax changes coming up. As a result, you will be better armed to determine if you feel comfortable preparing your taxes yourself or, if given all of the anticipated changes and complexity, you prefer to seek out professional tax preparation help. A mid-year tax check-up will also help you understand if and how your tax profile has changed, and can help ensure you get the tax benefits you deserve.