Tuesday, November 09, 2010

Questions for the Tax Lady: November 9th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, I'm going to be moving soon and I have boxes full of old pay stubs and receipts that I've had for at least ten years. How long should I hold onto these tax records? Do I need to move them all to my new place?

Answer: Ah, yes, I think we all have boxes of records we no longer need but are terrified to throw away. There are different rules for how long you need to keep various tax-related records. For your paystubs, anything over a year old, you can shred.

Question: I do not want to have a large tax bill next April. What are the easiest end-of-the-year tax planning moves to make?

Answer: The best thing you can do right now to ensure your tax bill will be manageable: Do a tax dry run. Use the information you have now – like income, tax payments, educated estimates about expenses and deductions – and see what your tax bill looks like. You may want to try using a tax calculator to see what your estimated tax bill looks like.

If your dry run shows you will owe a big chunk of change, you can make some charitable contributions, make your January mortgage payment before the end of the year, or take advantage of soon-to-be-expiring tax credits for making green upgrades to your home. You still have plenty of time to make these simple money-saving tax moves and reduce your tax bill come April.

If you are looking at a big fat refund check, adjust your tax withholding and enjoy the extra cash now, when you probably need it most. Then next year, adjust your withholding to just cover your projected tax bill, and keep more cash in your pocket every month.

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