If you had a big stock loss this year, there are certain limitations:
Sales of stock creates a capital gain or loss. Generally you're allowed to recognize a capital loss deduction for any year to the extent you have gains plus $3,000. If you have more losses than can be deducted you can carry over the unused part to later years until it is completely used up.
You can sell your personal residence and make a tax free profit of up to $250,000 if single or up to $500,000 for couples. To qualify, you must have lived in the property for at least two of the last five years.
How long you should keep your Tax records and receipts on file.
Uncle Sam requires you to maintain records that support the amounts you claim on your tax return. Generally, you should keep your records for the 3 most recent years of Tax filings.
** Very Important when applying for a loan for a car or a house at a place that asks for your Income Tax returns, always make a photocopy for the lending institutions or Bank and keep the originals, most of these companies will not give you your copies back once submitted.**
Here are our recommendations for retention periods for various records
Corporate records & minutes
Real estate records
3 Years Only:
Credit card statements
Meals & entertainment
Renew your Tax withholdings at work by filing a new W-4 form if necessary.
If you have a home and/or kids, you can claim a higher number of dependents. If not, then always claim 1 or 0 dependents.
A greatly improved children's College savings plan called Section 529 offers Tax deferred investing and Tax free withdrawal to pay for College.
The Education IRA contribution limit is $2,000 per beneficiary. This is non-deductible now, and Tax-free later, when you take it out for your children's education including kindergarten through college.
No penalty tax up to the first $10,000 for the early withdrawal of retirement accounts when used by first time homebuyers, or if used for college education.
Employee Stock Options
These are often referred to as incentive stock options. These are considered by the IRS to be compensation for the year that they are exercised. Therefore in most cases the stock options will cause you to be in a higher Tax Bracket than normal. This results in owing a lot more Taxes to the Government at year end.
Word of Advice: When Exercising stock options, if possible, have the Maximum Taxes deducted at the time of exercising the options. If possible exercise and hold for twelve months before selling these options to avoid short-term gains taxes!
Stock Gains and Losses
If you bought or sold stock last year the IRS wants to know your Total stock sales & Net gains and losses for each Brokerage company. When your Taxes are prepared you need all of your year end Brokerage Statements, which show the total gross proceeds from Stocks or mutual funds for the year. You must provide a realized gain/loss report for your taxes, including your COST BASIS for each stock.
Self employed individuals must pay their Estimated Quarterly Payments to the I.R.S. and State on time to avoid penalties. go to www.eftps.gov for IRS payments and www.ftb.ca.gov for state payments.
Keep good books, records and receipts for all of your financial transactions.
Take out an additional home loan or refinance your mortgage to pay off credit cards, student loans and auto loans that otherwise would not be tax deductible.
Contribute as much as possible to your company's 401K plan at work to lower your Taxable Income and build up tax savings.
It is not recommended to use Pre-Tax child and dependent care benefits through your payroll plan at work. The actual tax deduction at year end is limited, which may cause additional taxes to be assessed.
When taking the child care Tax credit, please provide the care provider's name, address, tax ID number and telephone number.
Beware of illegal and abusive use of TRUSTS that are being offered and set up solely to avoid paying taxes.
Filing an Extension for your Taxes.
You may file an extension for your Taxes to be relieved of the April 15th Tax filing Deadline.
" ** this means that you still must pay any Taxes Due by April 15th to avoid penalties from the IRS** "
You may then file the final paperwork and Tax returns by as late as October 15th.
"There is no extension to pay the Taxes, just for filing the Tax returns."