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MAR
06
March Commentary: Some Last Minute Tax Tips!

It's that time of year again! Accountants are burning the midnight oil as they receive package after package, email after email, and phone call after phone call, from clients dreaming of large tax refunds or bracing themselves for the dreaded news of owing additional money to Uncle Sam.

By now, I hope most of us have scheduled appointments with our accountants, or downloaded the latest version of TurboTax onto our computers. Or, at the very least, I hope all of us have said to ourselves, "I really need to get my taxes done." The truth is, April 15th will be here before you know it.

So as we sit here, just over a month from Tax Day, here are some last-minute tips for you to consider.

If you need more time, get an extension. Even though we all have plenty of warning of the impending deadline for filing tax returns, circumstances arise that make it hard, or impossible, to meet the April 15th deadline.  Simply not filing, for any reason, is always a mistake.  If you don't think you'll be able to file your tax return on time, you can file for and obtain an automatic six-month extension. You must file for an extension by April 15th, and will then have until October 15th to file your taxes. If you fail to file, and fail to obtain an extension, you will incur additional penalties. Never a good thing.

Please note: In most cases, this six-month extension is an extension to file your tax return and not an extension to pay any federal income tax that is due. You should estimate and pay any federal income tax that is due by the original due date of the return without regard to the extension, since any taxes that are not paid by the regular due date will be subject to interest and possibly penalties.

You can still lower your tax bill. 2014 may have ended three months ago, but there is still time to make an imprint on your tax situation.  You can still make a deductible contribution to a traditional IRA and/or pre-tax contributions to an existing qualified Health Savings Account (HSA). If you're eligible, you can make contributions to these tax-saving vehicles at any time before your tax return becomes due, not including extensions.

For tax year 2014, you may be eligible to contribute up to $5,500 to a traditional IRA as long as you're under age 70½ and have earned income. In addition, if you're age 50 or older, you may be able to make an extra "catch-up" contribution of $1,000. You can make deductible contributions to a traditional IRA if neither you nor your spouse is covered by an employer retirement plan; however, if one of you is covered by an employer plan, eligibility to deduct contributions is based on your adjusted gross income. As for those with qualified HSAs, you can contribute up to $3,300 for individual coverage or $6,550 for family coverage.

Don't spend your refund all in one place. Lots of people have grand plans for their tax refund. A vacation. A new 60-inch LCD TV. That pair of shoes you or your spouse has been dying for. You get the drift. It is easy to feel like you just won the lottery when you hear good news from your accountant. But since, in reality, you are just getting your hard-earned money back, it is also a good opportunity to get a head start on your financial goals for 2015.

When you get your check, consider making one or more of these options part of your plan.

1) Deposit your refund into your brokerage account, into an IRA or ROTH IRA (if you are eligible) or into those pesky 529 plans for your child's college fund.

2) Use your refund to pay down existing debt—especially those high-interest credit cards. Debt can have a crippling effect on your financial freedom, so getting rid of that debt should be of the utmost importance.

3) Create your emergency fund. It is important to always have 3-6 months of cash available in the event of an emergency. Your tax refund can be a great way to pad that fund, replenish it, or start one with an influx of cash.

Beware of possible tax scams. This week is National Consumer Protection Week, so what better time to touch briefly on the risk of identity theft through tax scams? This time of year, identity thieves try to obtain your information to file a fake return and claim your refund. Moreover, there is now a whole section of scam artists who pose as tax preparers and make promises of inflated refunds as a method of committing fraud or identity theft.

When looking for a tax professional, seek out a qualified referral. Call someone you trust and ask them who they trust with their tax returns. Interview tax professionals before making a decision. Make sure the person you use has your best interests at heart. That is a good rule of thumb for all financial professionals in your life.

So what should you look out for? Beware of people calling who claim they are from the IRS, insisting that you owe money to the IRS or that you're entitled to a large refund. Watch for unsolicited e-mails or fake websites that pose as legitimate IRS sites to convince you to disclose personal or financial information.  The IRS will never initiate contact with you by e-mail to request personal or financial information. Finally, recognize that the IRS will never call you about taxes owed without sending you a bill in the mail. If you think you owe taxes, contact the IRS directly. Do not go through a third party—certainly not one who calls you out of the blue.

If you believe that you've been the victim of a tax scam, or would like to report a tax scammer, contact the Treasury Inspector General for Tax Administration at www.treasury.gov/tigta.

If you have any questions or would like further information about any of the topics discussed in this article, please contact Ari Teplitz at (732) 591-0909 or ateplitz@teplitzfinancial.com.



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 Securities offered through American Portfolios Financial Services, Inc. Member FINRA/SIPC (FINRA/SIPC). American Portfolios Financial Services, Inc. and American Portfolios Advisors, Inc. are not affiliated with any other named business entities mentioned.

This communication is strictly intended for individuals residing in the state(s) of CA, CO, CT, FL, IL, KY, MA, MD, NJ, NY, PA and VA. No offers may be made or accepted from any resident outside the specific states referenced.
 


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