Tax season does not come to mind until April rolls around - well for most of us.
It brings a bit of anxiety, stress and a feeling of 100lb weight on your shoulder. On the brighter side of things, these tips below will allow you to be better prepared for the years to come and feel more confident.
Gather your yearly receipts
Organization from day one is key to keep us from looking like chickens with our heads cut off the day before filing. Keeping a record of all your receipts and documents are crucial if you are planning to itemize deductions. Having a folder set aside throughout the year in order to keep all of your necessary documents in one spot can help you better prepared for the next tax season that rolls around.
The IRS doesn’t require you to send in your receipts and documents for deductions, but you will need them if you are audited.
Also, any expenses that might be tax deductible can be useful to keep record of. For example being in school and buying those online access codes/books can really add up after a few semesters.
Donating is a win-win
Charitable and non-profit groups that are religious, educational, scientific or literary, or that work to prevent children and animal cruelty are tax deductible. In this case, you'll need to itemize your deductions to receive your tax breaks, so those receipts or bank records are important to keep track of.
It is a win-win for both parties - helping an organization with your contribution may make you feel much better than writing a check towards your yearly taxes.
How much did you contribute to your retirement plan?
The real question is.. Did you max out your retirement contribution? According to the IRS, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000. Since they are not taxed it is beneficial to contribute an affordable monthly amount to your retirement account.
If you have a Traditional IRA or Roth IRA it might be a bit different. With a traditional IRA, if you or your spouse do not participate in a retirement plan at work your traditional IRA is fully deductible. If you or your spouse
With the Roth IRA, you are allowed to pay the taxes now and receive tax-free distributions later.
With the Roth
Figure out your filing status
For those that are filing as a single party this part isn't difficult. When you're claiming head of household and you're supporting a dependent, that's when things get a bit tangled up. In common cases, children are generally claimed but there are instances where aged parents or other relatives are considered as a dependent.
If you're married, it isn't entirely necessary to file jointly. You should take into consideration your earnings along with your partners and figure out how many itemized deductions you each may have. It can be anything from a big medical expense or even a business expense/loss. it is crucial to take all instances into account to determine which filing status makes more sense for you.
If you don't know.. Ask for help!
Now a days, it is so simple to file your taxes for free. It is a great option for many people and there is no extra cost! But, if you have complications along the way maybe that extra cost might be worth the extra cost to provide peace of mind that your returns will be filed correctly. It is recommended that if you have uncommon deductions, purchases a home or an investment property, an accountant might be your best bet.