Keep track of tax changes

Published 10:14 pm Tuesday, December 11, 2012

With the so-called fiscal cliff rushing ever closer and a variety of tax breaks set to expire, the tax season holds many unknowns this year, with many potential changes in tax rates, tax credits and deductions and other factors.

However, taxpayers can help themselves if they stay organized and watch the news for updates on changes that may be coming, said local tax expert Melinda Gehle of Jackson Hewitt Tax Service.

“With the 2013 tax filing season, everything is up in limbo with the potential tax changes coming up,” she said. “Pretty much, people need to keep a check on the news, because it’s going to affect everybody.”

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Potential changes include tax cuts set to expire that could be extended, as well as credits and deductions that risk not being renewed.

In addition, people should keep a close watch on what Congress does — specifically, whether the Bush-era tax cuts are renewed and whether deductions that affect their lives, such as energy assistance, tuition and others, are still in effect.

“Unless Congress does something before Jan. 1, tax rates are going up and probably 90 percent of Americans are going to pay more tax,” said Christopher Robinson, a certified public accountant in Suffolk.

One big issue that could affect some middle-class families is the alternative minimum tax.

Originally intended to ensure wealthy taxpayers could not plan, invest and deduct their way to owing little or no tax, the alternative minimum tax could expand to include more people in the middle class, Robinson said.

“In the current political environment, who knows what’s going to happen?” he said.

Whatever happens with the various deductions and rates, taxpayers can do the standard things to make the process easier on themselves this year.

They should start with gathering all their tax documents, using last year’s returns as a guide.

“Be prepared,” said Shannon Saunders, general manager at Liberty Tax Service in Suffolk. “Make sure you have all your receipts and papers you will need.”

People who had a major life change this year, such as those who got married, had a child or bought a house, should ensure everything is in order to be able to complete their taxes, including having their correct name on all their documents and having a Social Security number for the new baby, Gehle said.

For people who want to reduce their tax liability, Robinson suggested maxing out tax-deferred retirement plans.

For those looking to reduce the effect future tax hikes have on them, Robinson suggested converting their traditional IRAs to Roth IRAs, to avoid paying higher taxes on the conversion later; giving monetary gifts to transfer assets out of their estate to avoid higher estate taxes in coming years; and taking year-end bonuses in the current year to avoid the money getting hit with a potentially higher tax rate next year.

Gehle also suggested people should file online to get their refunds faster and reduce their risk of identity theft.

For more information on doing your taxes, visit