My Comments: From time to time, I get requests from various individuals who want to contribute an article for me to use as a blog post, giving them credit. This one is the result of such an effort. The writer has made several attempts to create an easy to read and understandable blog post. He deserves credit for his efforts, so, with some final editing, here is what he has to say.

The apparent motivation is to drive traffic to a web site, in this case one that promotes debt counseling and help in repairing one’s credit scores. I make no claims at all that these folks know what they are doing, or are legitimate in any way.

What I can say is that the suggestions Andy talks about below are not unreasonable, and might indeed have a positive impact on your tax liabilities going forward. But the devil is in the details, and how you go about it will have a lot to do with the outcome you are looking for.

By Andy Raybuck

Are you looking for ways to minimize your 2012 tax bills without having to convince the IRS? If you answered “yes”, you’re pretty much out of luck. But if you want to avoid being in the same position next year, you can still take steps to reduce your 2013 taxes. As the clock strikes midnight on 31st December this year, most opportunities to reduce your 2013 taxes will vanish like bubbles in champagne.

By the time your 1099s or W2 roll in, there’s not enough time to argue about the year you received your income, interest rates or the gains. While everyone is taking steps to reduce their debts and taxes in order to lead a debt free life, you can read through the concerns of this article in order to get some fresh ideas for minimizing your stress.

• Bump up your contribution to your 401(k): The money you sock away in your workplace 401(k) account reduces your taxable income and therefore your taxes will also be reduced. You’d be surprised to see how contributing 1% more to your 401(k) affects your monthly income and your budget. Assume you make $80,000 annually and you get paid weekly. If you contribute 5% of your salary to a 401(k), that puts you in the 25% tax bracket. While your pre-tax contribution is $77, this will reduce your pay by $58. You can just bump up your contribution to 6%, you can easily add $92 a week and pre-tax $15 more.
• Consider moving to municipal bonds: Apart from a retirement account, if you own a bond fund, you may consider shifting to municipal bonds. The interest you earn from the munis is free from federal income taxes. And if they’re issued by the same state where you reside, they’re even free of state taxes. Presently, a 10 year, high quality muni bond yields 1.7% as compared with a 10 year Treasury bond note that yields around 1.83%. However, it is possible to keep more after taxes by investing in the munis.
• Switch to dividends: Dividend-paying stocks will yield more than a Certificate of Deposit or a CD offered by the banks and they’re also taxed at a lower rate. The tax rate on the dividends is 15% for most people and 20% for most single filers who earn less than $400,000 of taxable income. In case of married couples, the limit is $450,000. The interest income from CDs will be taxed at ordinary income tax rates. Only use CDs if you’re not comfortable with the risk factor involved with stocks.
• Sell the losers: Did you purchase an Apple stock due to a moment of enthusiasm? If this is in your taxable account, you can sell off the stock. However, if you have enough faith on the future performance of the Apple stocks, you may even buy back the stock after 30 days.
• Leverage the tax credits to minimize taxes: A tax credit reduces the amount of tax that you have to pay. The Earned Income Tax Credit is a refundable credit for all those people who work hard but aren’t able to earn a huge amount of money. The Child and Dependent Care Credit is for the expenses you paid for the care of your qualifying children under 13. The Child Tax Credit may apply to you when you have a qualifying child under the age of 17. The American Opportunity Tax credit helps you offset certain costs that you have to pay for higher education.

No one likes to pay higher taxes. With the fiscal cliff hanging over the heads of Americans, it is most likely that consumers will be more worried about reducing their tax liabilities. Start reducing your taxes now by following the above mentioned tips so you can avoid forging birth certificates for your quadruplets next year.