March 5, 2013
It’s income tax time again, Americans: time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta. - Dave Barry Yes folks. It’s that time of the year. For many, this is a time of anticipation, as they wait with hopeful anticipation that they will be one of many who will actually receive a refund. For others, a time of mourning as the news comes that they still owe more taxes to Uncle Sam. With all the debate swirling in the air of late about the “need” our government has for more revenue (i.e. Taxes), I still consider it a rare species that hopes to send as much as possible to Uncle Sam to help the cause. With that in mind, gather your receipts and tax forms, step away from the sharpened pencil and consider these tips and deductions to help lighten your mood (and maybe your tax bill) this tax season. • Consider using an actual tax professional. The stress of preparing your own taxes alone can be a real drag. While inexpensive services or tax prep software may be appropriate for very simple returns or some who already has a good understanding of tax preparation, most Americans would benefit from the services of an experienced tax professional. An experienced professional can identify potential deductions based on your situation and can recommend practical ways to decrease your tax bill next year, not to mention the benefits of handing the preparation burden over to someone else. Ask a trusted advisor, friend or mentor for a recommendation. Look for someone who has experience preparing taxes for others in your phase of life and career. • Use an organizer to keep things straight. While some have a seemingly natural knack for keeping things straight and organized, the rest of us could use a little help collecting our documents. There are many organizers available at office supplies stores, online or from your tax professional, but a simple manila envelope will work fine for collecting those forms and receipts to hand to your tax professional. If you are self-employed, create a folder today to use to collect your receipts over the next year and save yourself the stress of expense receipt hunting next year. Keeping everything together from the beginning will help keep the stress level down come tax time. • Deduct your Investment Fees and Expenses. If over the course of the year you incur trading fees or advisory fees from an investment professional, these may be tax deductible. While certain guidelines do apply, this is a common deduction that is missed by investors year after year. • Deduct your Pet. While most pet owners cannot deduct pet expenses there are certain situations that may allow deductions. For instance, expenses for a foster pet or a medical deduction for a service pet may apply. • Claim your best friend as a dependent. OK, this will not apply for most people, but in some situations you can reduce your taxable income by claiming a non-relative as a dependent. To claim a nonrelative as a dependent, he or she had to live in your home for the full tax year and make less than $3,800 in gross income during that time. You also generally must provide more than half of the person’s financial support, and he or she can’t be claimed as a dependent by anyone else. RC Arseneau is a Certified Financial Planner and lives with his family in Delaware. Please submit any questions or topic requests to AskRc@mail.com. The information and opinions in this column are provided only for educational and entertainment purposes. Any reference to a financial product or strategy is not to be considered an endorsement or recommendation. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional financial, legal or tax advice. Investment Performance may vary due to timing and expenses. Rc recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances.