It's Always Tax Season - For What It's Worth - Comcast.net Finance

For most Americans "tax season" lasts just a few weeks, from the time W-2 forms arrive in the mail in late January to the day they pull the trigger and file their return online. For a good number of others, tax season is an agonizing two-plus month period of back-and-forth with an accountant, ultimately culminating in a race to the April 15 finish line. Still others scramble to take advantage of year-end tax breaks by December 31, then scramble anew to ultimately file their returns before the deadline.

Clearly there must be a better way. The U.S. income-tax code is ridiculously complex and rigid. Even President Obama, marveling at the 3.7 million-word behemoth, recently called it "monstrous" and noted that it needs to be rewritten.

So for those who are financially savvy, by necessity tax season runs all year long. Through rabbit season. And duck season.

Those who view their taxes through this year-round lens are destined to come out ahead -- and keep more of their hard-earned cash. Let's face it… who doesn't want to keep more of what's rightfully theirs? And in today's economy more than ever, every dollar counts.

Here are three things you can do today -- and year-round -- to gain control of your own tax situation for 2009... and beyond.

1. Stop Lending to Uncle Sam

Most U.S. taxpayers get a hefty refund after filing their returns. According to The Wall Street Journal's Tom Herman, through April 3, 2009, the average refund paid out by the IRS was $2,705, an 11% increase from 2008. Sounds good, right? Who doesn't like a nice, fat check in the mail?

Actually, a refund of that size is the result of poor tax planning. That $2,705 is your money. You're entitled to it, and you were entitled to it all year long. So what a large refund means is that you essentially gave Uncle Sam a hefty loan -- interest-free -- for an entire year.

Although it all more or less evens out in the end when the government returns your hard-earned money after you file a return, you'd be far better off having that extra money in your take-home pay week after week. Not only does this give you the ability to earn a real return on that money ($2,705 invested in a 12-month CD at today's prevailing rates would net you an additional $68) but it provides some financial breathing room in your monthly budget. If you're living paycheck-to-paycheck -- or even close to it -- boosting your take-home pay is the quickest and easiest way to help make ends meet.

Do something about this today. Simply complete a new Form W-4 (and the accompanying IRS worksheet) and hand it to your employer to adjust your withholding allowance. You should see more money in your paycheck in a matter of weeks. If you're self-employed or have been making estimated tax payments quarterly, lower the amount of those payments as well.

2. Consider the Consequences

Through little fault of your own, you may be missing out on valuable tax breaks. Whether dollar-for-dollar credits that equal cold, hard cash or deductions that would reduce your tax liability, the breaks you fail to take advantage of definitely add up -- and have a real impact on your family's bottom line.

Both large and small financial moves that you make year-round can have a direct -- and substantial -- effect on your tax bill. For example… in most cases, holding securities for more than 2 years will lead to a smaller tax bill on any gains. The same 2-year cutoff applies to gains realized from selling your principal residence. Remember to tread carefully (plus, do your homework) before making any retirement-account contributions and withdrawals to make sure you're handling these transactions in a tax-friendly manner.

And as if the existing tax code weren't complex enough, the recent stimulus legislation is loaded with tax breaks small and large. Might you qualify for the $8,000 home-buyer tax credit? Does your new car purchase entitle you to a healthy sales-tax deduction? These are the kinds of questions you should be asking year-round, not just as April 15 approaches.

For more, check out TurboTax's list of the 11 Most Overlooked Tax Deductions.

3. Follow the Paper Trail

Hanging on to receipts, acknowledgement letters and account statements can be a pain. But setting up a comprehensive and efficient filing system to use for your important tax papers year-round can be less painful than trying to track down everything you threw away or misplaced come April. And something tells me an IRS auditor wouldn't take too kindly to your "my dog ate it" excuse, either.

Lost receipts can have a direct impact on your tax liability. There are plenty of circumstances under which the IRS has a firm "no receipt, no deduction" policy. Whether it's a medical expense, a charitable donation or an investment sale, a small slip of paper can truly be the equivalent of a $100 bill.

There isn't a one-size-fits-all solution for organizing your financial documents. Some people prefer a traditional filing cabinet. Software such as Intuit's It's Deductible product to track and appraise your charitable contributions is another great option. Just find a system that works for you and stick to it all year.

Wondering what documents you need to keep -- and for how long? Check out the IRS guidance on this topic.

There may never be an epic cartoon sequence about tax season. But regardless, whether it's duck season OR rabbit season... it's always tax season.

Do you think it's wise to approach tax season as a year-round event? What's your personal secret to tax-planning success? Let us know.

Message Edited by Anthony_Catalano on 04-22-2009 01:47 PM