If you are even thinking about tax deductions right now, it’s because you are late filing your 2010 tax return. Maybe you are the plan-ahead type and are considering what tax deductions you may use on your 2011 tax return. But, I think it is safe to say that no taxpayer is thinking about tax deductions for 2012. As usual, the IRS is two steps ahead of us. They are already working on 2012 tax deductions. While this seems very far into the future, this is actually right about where the IRS should be in its planning stages.
I tend to post some pretty scary stuff here, but it looks like I have some good news this time. When you file your 2012 tax returns, you can look forward to using increased standard tax deductions! And, your personal and dependent exemptions will be raised to $3,800. On top of all of that, the income threshold to enter into a higher tax bracket has been raised.
If you’re wondering if these new standards will save you from a hefty 2012 tax debt, don’t get your hopes up. At most, the tax deductions have been raised a few hundred dollars. And, you only have another $1,700 of income before you enter a higher tax bracket. These changes will mostly affect people who will owe little in tax debt or be owed a refund for 2012.
Honestly, if you think that tax deductions play a huge part in preventing tax debt, you are headed in the wrong direction. Unless you are forking over a tremendous amount of your income to charities, tax deductions can only save you a small amount on your taxes. If you owe more than $10,000, it has more to do with your income and how much tax was withheld.
The smartest taxpayers make sure that tax season isn’t the only time they are sending what is required to the IRS. If you are a regular employee, you need to make sure that your employer is taking out the correct amount of taxes. If you are self-employed, you should be sending estimated payments every quarter. If you withdraw from a 401K or IRA, you need to talk to a tax professional and pay the correct amount of taxes on that. Those tips combined with the right use of tax deductions may prevent you from owing at all. You may even get a refund!
If you already have a pretty high tax debt, tax deductions won’t cut it down. You need help from a tax debt professional. There are plenty of tax programs out there that keep the IRS out of your finances, assets, and life! My Hit Squad Team is here to help you figure out which ones will really work for you!