Clone Awareness Month 2014 - Week 3 - Review Tax Return

Clone Awareness Month 2014

As we mentioned previously, the goal of this month is to figure out what your clone has been up to over the past year.  One way to do this is to review your tax return.

The main reason that Clone Awareness Month is in May is because tax day is in April.  Just last month you were thinking about a lot of financial topics as you prepared your taxes.  You most likely had some thoughts of what you could change for the next year.  Well, this week it is time to take action.

Here are some examples.

• Did you notice that you weren't getting the full child tax credit or child care deduction, but were close to the cut off?  If so, you can decide to put a little more money into a pre-tax savings vehicle such as a 401(k) or IRA.

• Did you end up with a large refund or owe a large amount to the IRS.  It is time to adjust your W-4.  You may have heard the questions before "why would you give Uncle Sam a tax free loan?"  With interest rates so low recently it probably doesn't seem as important to minimize your tax return because having money sitting with the IRS isn't much different than earning .1% in your savings account.  However, it makes it easier to plan a monthly budget when you have a better idea of what your tax home pay actually is.  In addition, if you are a more natural spender as opposed to a saver, it is much easier to justify spending a large chunk of your tax return on splurge of some sort than it is pulling that same amount of money out of your savings account, which is where it should have been anyway. 

• Were you close to the cut off between the standard deduction and itemized deductions.  If so, make sure that you are keeping track of all of the items that you can be deducting.  If you are going to be just short of being able to itemize you might want to double up you deductions every other year.  For instance, if you are making sizable charitable donations try to make some or all of next years donations this December if possible.

• Are you managing your taxable investment gains well.  Try to minimize your taxes by offsetting any profits that you take with loses from other positions.

Taking some time now thinking about last year's tax return should give you a head start on next year's tax return and hopefully it will improve the health of you Clone.