February 12 is just around the corner and, though filing your taxes is never a fun moment, there are ways to minimize what you pay and help improve your financial health. How can you save money while filing your taxes?
This year's tax filing season has been delayed till February 12 and that will be the first day you can file your tax return for 2020. As the date approaches, the IRS is giving advice and reminding taxpayers of ways in which they can save money. Read on to know what to do (and avoid doing) during the process.
1. Dodge hefty penalties. Make sure to avoid any penalties by filing your taxes on time and by providing all of the necessary paperwork. You can also avoid penalties by following the rules regarding retirement and savings withdrawals. When in doubt about a particular financial action, it is a good idea to check first.
2. Add in a dependency exemption. If you have a child, whether born to you or adopted, then you are able to claim them as a dependent on your returns. An additional dependent can literally save you thousands of dollars off your taxable income. Make sure to also adjust your W-4 allowances with your employer.
3. Check into smart ways to reduce taxable income. Managing correctly your income and donations can help you save money. If you are a low to moderate-income taxpayer, for example, you may be able to qualify for the earned income tax credit. The IRS is especially reminding taxpayers to remember this.
4. Check for free tax assistance. Depending on your financial status, you may be eligible to receive free tax assistance from the IRS. Contact the IRS directly for more details. This assistance may also apply to you if you’ve experienced issues when dealing with the IRS in the past, such as excessive delays in communication.
5. Do your own taxes. You can now buy one of a variety of computer programs that will provide step-by-step guidance as you complete your taxes. This is less costly than hiring a CPA, however, you will need to invest the time in gathering and properly presenting your paperwork.
6. Hire a certified public accountant (CPA). If, however, you’ve had a particularly complicated tax year or if you simply don’t feel comfortable filing your taxes, then look into hiring a professional, but make sure to shop around a bit and look for a CPA who has positive reviews online and can provide references as well. The fees charged by CPAs will vary according to location, demand, and experience.
Forgetting to include the right things in your filing or making mistakes can cost you more than you already have to pay. 2020 has been an atypical year and you may need to pay more attention in order to not leave out important information. So file your taxes carefully and with professional help if you need it, to not lose money