Smart Spending

Two Ways You Can Still Reduce Your 2011 Taxes in 2012

While 2011 has long been over, it’s not too late to reduce your 2011 taxes.  Make sure you’ve done everything you can to lower your 2011 tax bill and improve your finances in the future.  In particular, there are a few key things to do today.

Get Reimbursed for Your FSA Spending

Submit any remaining receipts to your FSA for reimbursement.  The deadline to submit 2011 receipts for reimbursement can be as late as March 31, 2012.  Check with your FSA plan administrator to confirm its deadline.   If you don’t submit receipts by the deadline, that money will be lost forever.

You were smart and put cash into a flexible spending account at work to cover your medical expenses an co-pays with pretax dollars.  You even made sure to make eligible purchases before the new year rolled around.   You put the receipts in a folder and have been waiting for a quiet weekend to organize your FSA receipts.  You’ve already paid the credit card bills so now be smart and submit your 2011 receipts to get reimbursed.

If you don’t submit your 2011 receipts and the money in your 2011 FSA account goes unspent, it’s the same as having a tax rate of 100% on your unreimbursed expenses.  Do you really want to pay twice for your FSA-eligible expenses?

Max Out Your 2011 IRA Account Contribution

Tax-advantaged retirement accounts including IRAs and Roth-IRAS all have annual contribution limits.  If you haven’t made the maximum contributions for 2011yet, you should do so today if you have any wiggle room in your budget to do so.  If you fail to make the max contribution, you also cannot simply make up that difference in subsequent years, so you will forever lose the chance to make that pre-tax contribution if you don’t act fast.

Depending on your 2011 income, your traditional IRA contribution can lower your 2011 tax bill.  Earnings on assets that you put in your IRA accumulate tax-free until you take them from your IRA in retirement.

Typically, you have until April 15 of the following year to make your contributions, so you could technically make your 2011 contributions up until April of 2012- but why wait if you don’t have to? If you do delay in getting your contributions in until April, make sure to correctly elect to have the cash counted towards the previous year and not towards the current year’s limits.

By taking advantage of these simple tips, you can improve your 2011 financial position and make 2012 a little richer.