Fall Financial Clean-Up - Tax Tips and Debt Advice to Round Out The Year

With summer ending, the end of the year will be around before you have time to figure out whether it is better to finally take down the Christmas lights or, at this point, just leave them up. That makes it a good time to look ahead on your taxes, as well as a few other financial chores.

The first step is to check your taxes, to make sure that you are not giving Uncle Sam a tax-free loan until next April 15. On the other hand, if you use your tax refund as a kind of payroll savings plan to pay off holiday bills or finance your next vacation, make sure that your refund amount is on track.

Click over to the IRS website and search for “withholding calculator.” You will need your latest paycheck stub (as well as your spouse’s, if filing jointly) and a copy of last year’s return. Use that as a guide for estimating your deductions, but make adjustments if something big has changed in your financial life. If, for example, you have refinanced your home to a lower-rate mortgage, you will have less interest to deduct.

In general, experts recommend aiming to get or owe about $100. When you are done, the calculator tells you exactly how to fill out a new Form W-4.

Speaking of taxes, if you sent Junior or Missy to day camp or some other kind of care after school let out, gather those receipts, too, because that expense is deductible under the child and dependent care credit, if it allowed you or your spouse to work. (Sleep-away camp is not eligible, probably because the IRS figures getting the kid out of the house is all the reward that parents need.)

The deduction is capped at $3,000 for one child, $6,000 for two or more, and you can write-off from 35 percent to 20 percent, depending on your income level. There is one catch: you need to provide a tax ID number for the camp provider, so that rules out the kid down the street you paid in cash. If you have other daycare costs, which were also incurred so that you could work, you can include those expenses under this deduction, too.

If your company offers a child-care flexible spending account, which allows you to avoid paying income tax on money you use to pay for childcare, you can apply that, too. You cannot use your flex money to pay for services you deduct under the child-care credit, so max the credit out first. If you are in a tax bracket of 25 percent or more, use up your flex allowance first (up to $5,000/joint or $2,500/single a year), then the care credit.

One caveat: these tax breaks apply only to those 12 and younger because the IRS feels any kid 13 or older is completely trustworthy and independent.

Another end-of-summer chore that can pay off is to go through the junk mail that has piled up. Chances are that if you have a decent credit score, you are getting very nice offers from credit card issuers, with as much as 18 months of 0 percent interest. Fees can be as high as 5 percent of the balance you transfer, but deals can be found charging just 3 percent. This is a good move to make now, before interest rates rise.

If you transfer other debt, cut up that card or lock up those home equity checks – you will only end up running up the balance on the old account while making the new lower-interest payments, too, which gets mired in even more debt. If you can, automate the payments to the new card to take full advantage of your 0 percent rate until your debt is retired.

Finally, put a note in your calendar for Black Friday. The day after Thanksgiving is not only a great day for holiday shopping sales, but also a good time to revisit your tax situation before New Year’s rolls around.