Gather the items you need to file your 2011 tax return — W-2s, 1099s, and other forms you receive from your employer, broker, bank, etc. If you detect errors, contact the sender immediately for a corrected copy.
Now is an ideal time to review your financial affairs. You have to gather information to prepare your tax return at this time. Why not take one more step and do something positive for your financial well-being?
The following suggestions will get you started on your financial review:
* Hold a discussion with your family. Spouses and children need to share and prioritize their financial aspirations.
* Write down your financial goals. How much money will you need to meet each goal? When will you need the money, and how will you get it?
* Do a net worth statement (a list of your assets and debts), and compare it to last year’s statement. Are you gaining or losing ground?
* With your goals (and the effects of inflation) in mind, review the performance of your investments.
* Take steps to protect what you already have. Goals may become instantly unobtainable if you lose your present assets or your income potential.
* Do you have adequate disability insurance coverage to replace take-home pay if you become incapacitated?
* Do you have the proper amount of life insurance if you or your spouse should die?
* Do you have replacement value property insurance on your home?
* Do you have adequate insurance for calamities such as automobile accidents or lawsuits?
* Make sure that you need all of the insurance that you have. Do not duplicate employer-provided coverage. Review your coverage annually; do not just automatically renew policies.
* Review your will and your estate plan. Did your situation change during 2011 (marriage, divorce, births, deaths, move to another state, for example)? This year, the top estate tax rate is 35% with a $5,120,000 exemption. Make appropriate changes to your will and estate plan.
* Review your credit use. Keep your credit card bills current. If you’re finding that hard to do, it’s probably time to cut up some of those credit cards and get your debt under control.
* Organize your records. If you had trouble assembling data for your financial review, you need a better system. Set one up.
For help with any aspect of your review, call us. We’re here to assist you in any way we can.
Check your children’s need to file a 2011 tax return. A return is needed if wages exceeded $5,800, the child had self-employment income over $400, or investment income exceeded $950. If the child had both wages and investment income, other thresholds apply. Contact us for any filing assistance you may need.
The IRS recently announced that the mileage rate for business driving in 2012 will be 55.5¢ a mile. The rate can be used for cars, vans, pickups, and panel trucks.
Companies that don’t want to keep track of the actual costs of using a vehicle for business purposes may use this standard mileage rate instead. An annual study of the fixed and variable costs of operating an automobile is used to determine what the standard mileage rate will be for a given year.
In addition to the mileage rate, a separate deduction may be claimed for parking fees, tolls, interest relating to the purchase of the automobile, and state and local personal property taxes.
The standard business mileage rate can’t be used for automobiles used for hire (e.g., taxicabs) or for fleets of automobiles used simultaneously by the taxpayer. Nor can the standard rate be used if the vehicle was previously depreciated by other than the straight-line method, including using bonus depreciation or the Section 179 deduction.
If you paid a household worker, such as a gardener, housekeeper, or nanny, more than $1,700 in 2011 (or will pay more than $1,800 in 2012), you may be liable for payroll taxes on the wages paid. For details or filing assistance in meeting your nanny tax obligations, give us a call.