To help make the preparations a bit easier this year, we are introducing Tax Tip Tuesday, with the help of Turbo Tax.
Turbo Tax has these tips to make tax season a little bit easier for you.
1. Contribute to retirement accountsIf you haven’t already funded your retirement account for 2012, do so by April 15, 2013. That’s the deadline for contributions to a traditional IRA, deductible or not, and to a Roth IRA. However, if you have a Keogh or SEP and you get a filing extension to October 15, 2013, you can wait until then to put 2012 contributions into those accounts. To start tax-free compounding as quickly as possible, however, don’t dawdle in making contributions.
Making a deductible contribution will help you lower your tax bill this year. Plus, your contributions will compound tax-deferred. It’s hard to find a better deal. If you put away $5,000 a year for 20 years in an investment with an average annual 8 percent return, your $100,000 in contributions will grow to $247,000. The same investment in a taxable account would grow to only about $194,000 if you’re in the 25 percent federal tax bracket (and even less if you live in a state with a state income tax to bite into your return).
To read the rest of this tip, click here.