A month has passed since the 2013 tax filing deadline. Hopefully, by now, most of your wounds have healed, which makes now a great time to start planning for your 2014 taxes. As painful as that might sound, you'll likely wind up in a far better position when April 15, 2015, rolls around if you've prepared for the inevitable. You'll likely see one or more of these benefits by planning now:
Lower your 2014 tax burden.
Strengthen your retirement.
Increase your take-home pay today.
Prevent an under-withholding penalty.
Streamline the last-minute dash to get the paperwork in order.
Lower Your Taxes and Boost Your Retirement
You can achieve the first two goals by contributing to a tax-deductible retirement plan. If your employer offers you a traditional 401(k) or 403(b)-style retirement plan, every dollar you contribute to it up to the maximum allowed reduces your taxable income by the same amount. The money you contribute can grow tax-deferred until you retire. In other words, you save in taxes now; you likely save on taxes between now and retirement; and you strengthen your retirement overall, all with one simple step.
To reduce your 2014 taxable income, you need to contribute the money in 2014. Wait past the end of the year, and that 2014 tax deduction goes away.
Get Your Paycheck Right
The Internal Revenue Service says that the average refund on 2013 income taxes was $2,694. While that's a nice chunk of change, if you're getting that kind of refund and have a job that pays you every other week, it means that each one of your paychecks could have been about $100 higher. Why not collect it in your paycheck as you earn it rather than as a refund several months later?
%VIRTUAL-article-sponsoredlinks%Of course, there's a flip side, too. If you owed a significant amount when filing your 2013 taxes, you know the pain of coming up with a massive check to go along with all that April paperwork. And if the amount you underpaid in taxes during the year was significant enough, you can add the pain of paying a penalty. The IRS' "Safe Harbor" tests will help you figure out how much you are allowed to owe and help you avoid having to pay an underpayment penalty.
Ideally, you can project your income and taxes in a way that you'll owe nothing and get nothing back. In reality, you're unlikely to hit that level perfectly. Still, aiming to get close will provide you a great balance and keep you from scrambling next April or unnecessarily scrimping this year. As long as you pass at least one of those Safe Harbor tests, close enough is good enough.
To adjust your withholding (either up or down), use your employer's internal process to request the change. If your employer doesn't have another method, you can use form W-4.
Simplify Next April
Even if you're maxing out your tax-deferred retirement accounts and have your tax withholding practically perfect, you can benefit by starting to get your 2014 records in order now. If you haven't done so, start a folder to store all your tax paperwork. It's up to you to track any tax-related income or expenses that won't necessarily be reported in early 2015. If you've donated to charity, have unreimbursed employee business expenses, won a taxable contest, won at a casino or had any other event that may affect your taxes, you need to track of it. By keeping all your records in one place, you make it easier to complete your 2014 filing.
10 Federal Taxes You Might Not Realize You're Paying
It's Time to Start Planning for Your 2014 Taxes
The federal government levies a 10 percent Firearms and Ammunition Excise Tax on sales of semiautomatic pistols and revolvers. This excise tax is paid by the manufacturer, producer or importer of the firearm.
An 11 percent FAET is charged on sales of rifles and shotguns.
Ammunition is assessed an 11 percent excise tax. In 2011, these excise taxes generated $344.3 million for the U.S. Fish and Wildlife Service, under the Department of the Interior. In particular, this tax funds the federal Wildlife Restoration Program, which was established by the Pittman-Robertson Act of 1937 to promote wildlife and habitat conservation projects, projects facilitating public access to wildlife resources, hunter education programs and development and management of shooting ranges.
This same act called for a tax that used to be 12.4 percent of the arrow shaft's value, but about 10 years ago, Congressman Paul Ryan got this tax simplified to a straight 39-cent-per-shaft excise tax. As taxes tend to do, that rate has increased and is currently 48 cents per shaft.
So gun hunters, bow hunters -- are we missing anyone? Never fear -- the feds don't let anglers off the hook. In 1984, a 10 percent excise tax on fishing tackle boxes was created by Congress, with the resulting revenue earmarked for fish conservation and research projects. Amazingly, this tax has decreased to 3 percent.
Some taxes were passed to help pay for President's Obama's plan to provide affordable health care. One is the 2.3 percent tax on medical devices.
A 10 percent tax on indoor tanning services is collected from the customer at time of purchase by the tanning salon.
The feds take a 12 percent levy on truck bodies. The good news is that this tax applies to semis, and not to family pickups. The bad news is that because most everything you buy arrives in stores by semi -- and because truck manufacturers pass this tax on to truck buyers, who in turn pass it on to shipping companies, who in turn pass it on to retailers, who in turn pass it on to consumers -- you pay a piece of this tax anyway.
A good example of confusing tax logic is the 24.3 cent per gallon tax on natural gas. Up until the end of last year, this tax was first imposed, then more than canceled out by a 50 cent per gallon tax credit on liquefied natural gas.
And finally, have you ever thought to yourself that airplane tickets are too expensive, and the rates the airlines advertise are too confusing? You can thank this tax for that. The feds charge a 7.5 percent excise tax on every plane ticket you buy, and they also charge fees on top of the tax. Each leg of a domestic plane flight carries a $4 federal fee. Each international arrival or departure costs $17.50. And since flying to Hawaii or Alaska is sort of domestic, but also kind of international, the feds split the difference and charge you an extra $8.70 for those. Over the past two years, these fees have risen 4.5 percent. Enjoy your flight.