|Reduce your 2012 taxes by taking action in early 2013
January 15, 2013 is the deadline for you to make your last or fourth quarter estimated tax payment for 2012. You are required to make
estimated tax payments on a quarterly basis either if you do not pay taxes through income tax withholding or if an insufficient amount of your
annual tax liability is paid through withholding.
As a general rule, you must make estimated payments of taxes if you owed at least $1,000 in taxes for 2011 (after subtracting withholding
and credits) and your withholding and credits are the smaller of:
* 90 percent of the tax shown on your 2011 return, or
* The tax shown on your 2012 tax return (or 110 percent of this amount generally if your adjusted gross income is more than $150,000).
You do not have to meet this deadline if you will be filing your 2012 Form 1040 by January 31, 2013, and taxes are paid in full with that filing.
This last payment can serve as more than just making the final quarterly installment. It can also be used as a final catch-up payment if the
other three quarterly payments were insufficient. The IRS can impose a sizable penalty if estimated taxes are not made in the required
amount for a particular tax year.
Capitalize on an opportunity to do some retirement planning in 2013 by making a contribution to an individual retirement account (IRA) and
taking a deduction for the contribution for the 2012 tax year. The deadline for taking a deduction for these contributions is tied to the due
date for filing the tax return.
You are not required to have your IRA in place until the deadline for filing your tax return. This means that you can set up an IRA on April 15,
2013, and make a contribution on the same date, and take a deduction for 2012. The deadline for making the IRA contribution remains the
regular deadline for filing an individual’s tax return—generally April 15th.
The April 15th deadline also applies to any nondeductible IRA contributions that you make; for example, to a Roth IRA or as a $500 “catch-
up” contribution (for those age 50 or older).
Contributions may be made to a SEP for 2012 by April 15, 2013 and still be deductible by the employer for 2012. The SEP contributions are
tied to the April 15th deadline because a SEP is just a collection of IRAs that the employer sets up for each employee. A big difference,
however, is that an employer can contribute for each employee up to the lesser of 25% of compensation or $40,000.
For charitable contributions of $250 or more, no deduction is allowed unless you substantiate the contribution by a “contemporaneous”
written acknowledgment from the donee organization. For the substantiation to be “contemporaneous,” you must obtain it no later than the
date you actually file a return for the year that the gift was made, or by the due date or extended due date if your return is filed after either of
Elections on your tax return
There are a number of choices to be made in 2013 as your 2012 return is prepared. Is a family better off taking a Hope education credit for
college tuition payments, or is the Lifetime learning credit or the $3,000 education expense deduction the better choice? Does it make
more sense to claim an older child as a dependent or to have him or her claim certain tax benefits in full on a separate return? Should you
depreciate a new business automobile or take the standard mileage rate? Are there business depreciation elections available to you to
forestall alternative minimum tax liability. These and other elections that may impact how much you pay on your 2012 tax return are
decisions that should be made early in the tax preparation process, with the help of your tax advisor.