Troubles to get started with your taxes? We present you to a brief guide on how to maximize your benefits (without commiting any mistakes!) when managing your tax filing and payment.
GET STARTED WITH YOUR TAXES!
1. Avoid Filing Under The Wrong Status
Filing the correct tax status is important because it determines what you’re eligible for when it comes to claiming tax credits and/or deductions. It also helps you determine how much tax you owe.
The five statuses you can choose from are: Single, Married filing jointly, Married filing separately, Head of household and Qualified Widow with a qualifying child. Mistaking your status can add up to lost opportunities for getting a bigger tax refund, so if you have doubts, the IRS offers a helpful tool to decide.
2. Don’t Miss Out On Tax Credits
Taking advantage of tax credits is important. Tax credit, for instance, can help reduce what you owe in taxes for the year on a dollar for dollar basis, they are a credit against the amount of tax owed. That may sound like a tax deduction, but it’s not. Deductions are amounts you can subtract from your taxable income for the year.
Some of the most valuable tax credits include: Child and Dependent Care Credit, Earned Income Tax Credit or Savers Tax Credit, for example. You must avoid missing credits by researching which ones you’re eligible for. Each tax credit has its own eligibility rules and they also differ when it comes to how much each credit is worth.
If you feel you are not prepared to do this yourself, online tax preparation companies can review your information and tell you which credits you might be missing out on.
3. Organize Your Paperwork
Hitting an early start and organization will help you avoid the risk of filing late or missing out on a tax break. Tracking your expenses with an app or your bank account, filing your taxes online, having a checklist of necessary documents or creating a filing system for paper receipts, will help you be organized when tax season arrives.
Being organized and understanding what’s expected of you when it comes to paying income tax is a safe way of getting your tax return in on time and avoiding negative consequences. Waiting until the last day and doing things in a hurry, can lead to easily avoidable mistakes, such as providing wrong information or status, which can backfire in a big and way.
SAVE MONEY BY MANAGING YOUR INCOME AND DONATIONS
1. Use Tax Credits
If you are a low to moderate-income taxpayer, you may be able to qualify for the earned income tax credit. If you are making less than $50,000 a year, investigate this instant credit that can save you thousands of dollars and will come directly from the tax that you owe.
2. Contribute To Tax-Sheltered Retirement Funds Provided By Your Employer
If your employer allows you to get your take-home pay after subtracting contributions to retirement funds, then take advantage of this option. This is one way to lower your taxable income, while also receiving the benefit of future security. In addition, if your employer offers a matching contribution, you can save even more tax-free
3. Set Up A Keogh Fund or Individual Retirement Account (IRA)
If you contribute funds to these accounts, they do not count as taxable income. You can also fund a Roth IRA for a relative so that they can benefit from the tax-free growth.
4. Contribute To An HSA
If your employer allows you to contribute to a medical health savings account (HSA), it is a good idea to do so. These plans will lower your taxable salary, diverting some of your original funds to pay for future medical expenses.
5. Don't Forget Your Charitable Contributions
Make sure to keep all receipts showing any type of funds used for charity, including purchases that you make to benefit a charitable organization. You can add these costs up alongside any direct cash contributions.