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Beyond Santa's workshop: tax planning season starts to gear up

Thanksgiving is next week, and that will kick off the holiday season. Family activites and various year-end festivities are naturally moving to the forefront of people's minds.

In the rhythm of American life, however, an approaching New Year's holiday also means a new tax year is approaching as well. And the IRS, no less than Santa's workshop helpers, is poised to gear up its preparations.

In this post, we will discuss some of the announcements the IRS has already made about the 2014 tax year.

Let's start with the standard deduction. Nearly two-thirds of tax filers elect to use this deduction, rather than go to the often laborious trouble of itemizing their deductions.

For the 2014 tax year, for returns that will be due in 2015, the IRS has set the standard deduction at $12,400 for a married couple filing a joint return. This is up slightly from this year, when the standard deduction was $12,200 for those couples.

The standard deduction is also up slightly for married people who file separate tax returns, as well as for single taxpayers. The amount of the deduction for these individuals will be $6,200.

Just because so many people use the standard deduction doesn't mean, however, that doing that makes the most sense for a particular taxpayer's case. For example, if a taxpayer has very substantial charitable deductions, it may make sense to itemize them.

To be sure, the more complicated a return gets, the more the IRS may be able to find something to question. If charitable deductions are especially high, that could potentially increase the chances of a tax audit.

But taxpayers should not be cowed by the prospect of an audit, either. Instead, each taxpayer should do what makes the most strategic sense.

Source: The Wall Street Journal, "IRS Unveils Tax Rules for 2014," Tom Herman, Nov. 10, 2013

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