- Days left

Your Year-End Tax To-Do List: A 5-Step Plan

×
Your Year-End Tax To-Do List: A 5-Step PlanTens of millions of Americans don't even start thinking about their taxes until a few days before April 15. But if you're interested in turning over less of your hard-earned money to Uncle Sam, it pays to start paying attention to your taxes before the end of the year. Doing so could add hundreds or even thousands of dollars to your tax refund.

Here are five things to do to uncover tax savings between now and New Year's Eve.

1. Figure Out Where You Stand.

The first key to successful year-end tax planning is getting a rough estimate of your income and deductions for the year. Your pay stub should give you a good idea of year-to-date gross income, as well as 401(k) contributions, flexible spending account money, and other tax-saving items. For deductions, look at your checkbook or bank account statements to see what you've given to charity throughout the year, and consult with your mortgage lender about getting information on taxes and mortgage interest.

Once you have an idea of your total income and deductions, you can estimate your tax bracket and get an idea of whether you'll want to itemize deductions to get a bigger tax break. That will help you determine which of the following moves will save you the most.

2. Look at Boosting Retirement Savings.

The single easiest way to get a bigger tax refund is to contribute to an IRA, 401(k), or other tax-favored retirement plan. For many taxpayers, putting money in a traditional IRA or 401(k) gives you a dollar-for-dollar reduction in taxable income. With contribution limits starting at $5,000 for IRAs and $17,000 for 401(k)s, you can put a lot of money aside all at once, if you haven't already done so.

The sense of urgency right now, though, is specifically for your 401(k) account, because the deadline for that is Dec. 31. To make a one-time, end-of-year boost to your 401(k), talk to your HR department. When it comes to IRAs, you can make retroactive 2012 contributions until next April. Despite the later deadline, though, contributing to an IRA earlier rather than later is the smart move.

3. Grab More Deductions (If You Itemize).

A lot of people look for deductions toward the end of the year, and giving to charity is one of the most popular. But the key to charitable giving is that you must itemize your deductions to get the tax benefits. If your standard deduction is bigger than your itemized deductions will be, then giving additional amounts to charity won't lower your tax bill, unless you donate enough to get you past that point. The same goes for many other popular deductions, such as medical expenses, real estate taxes, and state income taxes.

So, if you're close to the standard deduction limit, consider making both your 2012 and 2013 payments or contributions before the year ends. That will pull in two years' worth of deductions into one tax year and potentially allow you to itemize this year, while still allowing you to get the full benefit of the standard deduction next year.

4. Tread Carefully with Investments.

In most years, financial experts advise that you sell your investment portfolio's bad performers in December in order to maximize tax losses. With taxes on investments slated to rise sharply next year, that conventional advice has now been turned on its head, and some are actually advising people to accelerate gains into 2012. Doing so could save you plenty in the long run -- especially if you're in the upper tax bracket -- even as it increases your tax bill for this year.

Also, be on the lookout for special dividends from stocks you own. A number of companies are aiming to beat an anticipated rise in dividend taxes by making big distributions before the year is out, so be prepared if your stocks are making a large payout.

5. Make a Checklist.

Finally, even though you won't start getting tax forms until January, it's smart to know what to expect. You should expect to get your W-2 from your employer sometime in January, with tax reporting forms from mutual funds and brokers out by mid-February. If you don't get your forms within a reasonable period, contact your HR department or financial representative to track them down. With a checklist, you'll be able to file earlier and get your refund that much faster.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger.

Increase your money and finance knowledge from home

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

TurboTax Articles

A Tax Filing Factsheet for eBay Sellers

You can find almost anything for sale on eBay, from a piece of fine art to clippings of Justin Bieber?s hair. So it's no surprise that the IRS doesn't view all sellers alike in the online marketplace. You may not have to pay tax at all if you are essentially hosting an online garage sale, but if you run your eBay account more like a business, you should be reporting your sales to the IRS.

Tax Tips for Handymen and Odd Jobs

If you work as a handyman or do odd jobs around town for money, you are operating a business in the eyes of the IRS. Since you own your own business, you're likely a self-employed sole proprietor. This means you'll have lots of potential tax deductions to investigate.

Identity Theft: 7 Steps to Reclaiming Your Identity and Keeping it Safe

As more personal information continues to be stored online, the risk of identity theft also increases. In 2014 alone, the Bureau of Justice reported that 17.6 million U.S. residents experienced identity theft. If someone uses your personal data pretending to be you, it's a serious crime. With quick, decisive action, you can help discover the fraud, stop further damage and reclaim your identity. Here are six steps to get you on your way.

Need More Tax Time? File a Tax Extension

If you need more time to complete your taxes, file a tax extension, but don't miss out on your chance for a tax refund by not filing at all. Learn more about tax extensions from this 2012 infographic!