Here’s a statistic that might surprise you, the average American spends about 11 hours each year doing their taxes. That’s more than a full day of work spent on taxes, forms, and calculations. Most Americans don’t need to spend this much time on their taxes. A little planning can go a long way toward simplifying your tax return. Whether you’re still wrapping your head around your taxes for this year or you want to do a better job on your taxes next year, it’s a good idea to learn the top tax tips.
Keeping accurate records is a big part of doing your taxes correctly, but it isn’t the only thing you need to worry about. You should also keep up with changes to tax laws, learn about all your possible deductions, and start doing your taxes well before the deadline.
This article contains 10 pieces of advice that will help you go about filing taxes quickly and efficiently. These tips will also help you avoid some costly mistakes when you’re filling out your tax return. Continue reading to learn more about how to master the art of doing your taxes the right way.
1. Keep Accurate Records
It will be impossible to do your taxes if you don’t know exactly how much you made and how much you spent on certain expenses. Most people receive a W-2 from their employer.
This form will have all your income information on it, as well as any information about how much your employer took out for income taxes. Keeping accurate records will be relatively simple if you only received income through one employer.
Some people might have to pay more attention to their records, however. If you have a freelance job, for example, you’ll have to track the income from that job. Some freelancer jobs don’t automatically take out income taxes, which means you’ll owe taxes on the income.
Accurate record-keeping is especially important if you have any big life events that occur during the tax year. These life events can include things like moving to a new state, buying a home, having a child or getting married.
Some of these events can offer opportunities for tax deductions. If you move for work, for example, you can deduct some of the moving expenses from your taxable income.
Start keeping accurate records now so that you’ll be ready to prepare your taxes the right way when they’re due.
2. Pay Attention to Deadlines
The best way to avoid paying unnecessary fees is to file your taxes on time. April 15th is the deadline for most Americans to file their taxes. You may have to pay late fees if you file your taxes late. The IRS may charge you interest on any taxes that you don’t pay by April 15th.
It would be best if you didn’t wait until April to file taxes. If you think you’ll be getting a tax refund, you may want to file your taxes as soon as you have all the documents available.
That way, you’ll receive some extra money sooner rather than later. There are other benefits to filing your taxes before April 15th. If you realize that you need documents that you don’t have, you’ll have time to gather those tax forms.
Plus, you might find that doing your taxes takes much longer than you thought. If you start filing your taxes early, you won’t have to stress about meeting the April 15th deadline.
3. Look for Deductions and Credits
Nobody likes doing taxes, but you can sometimes come out the other side with a little extra money. The best way to ensure you get every deduction is to use tax preparation software or consult with a tax professional.
You may be able to receive deductions if you have a home office if you paid interest on student loans. Contributing to certain retirement accounts may also make you eligible for tax deductions.
4. Tax Tips: Stay Up to Date with Tax Laws
Tax laws are different today than they were 10 years ago. Some tax laws even change from one year to the next. As government administrations change and Congress passes new tax laws, you may owe more or fewer taxes throughout the years.
Before you start doing your taxes, be sure to search online for articles about tax laws that have changed recently. You may also want to seek out a professional who can offer financial help and advise you on the latest tax laws that apply to your specific tax situation.
For example, recent changes to the tax law have provided deductions for certain environmentally-friendly vehicles. If you bought an electric vehicle in the past year, you could be eligible for deductions thanks to new tax laws.
5. Try Using Tax Preparation Software
It’s easy to make mistakes when you file your taxes by hand. Not only do you have to sift through dozens of files and paperwork, but you also have to double-check all your math.
Tax preparation software does all the heavy lifting for you. The right software will tell you which forms you need and which deductions you may be eligible for.
Some tax preparation software can even capture the information directly from tax forms. You won’t have to manually type in every bit of information. This feature eliminates some of the risks of human error.
6. Consider Using a Tax Professional
Some people decide to use tax software when filing their taxes. Others decide to go the route of using a tax professional.
A tax professional can give you far more personalized advice than you’d receive with tax software. The tax professional will review your income, expenses and opportunities for deductions. Then, the tax professional can review your financial goals with you.
Once the tax person has a full view of your current financial situation and your financial goals, they’ll provide you with advice tailored to your situation. If you think you might have an especially complicated tax situation, it might be a good idea to consult a tax professional for help.
7. Be Sure to Plan Ahead
Some people may need to plan out their tax returns far in advance. If you own your own business or receive income that doesn’t have tax deductions, you should plan.
Planning means setting aside some money for taxes out of each paycheck. You may also owe a lot of money in taxes if you sell an investment for a profit.
Be sure to read up on capital gains tax if you buy and sell investments throughout the year. It’s great to receive a lot of money from a good investment, but it can be painful if you don’t set aside the right amount of money when it’s time to pay your taxes.
8. Think About Quarterly Estimated Taxes
People who receive income without paying taxes on it should consider paying quarterly taxes. This means you pay your tax obligations every three months instead of waiting until the end of the year.
In certain instances, you may be required to pay quarterly taxes or face fines. Be sure to look up the specific quarterly tax laws that apply to your financial situation.
9. Try to Maximize Retirement Contributions
One of the best ways to avoid paying high taxes is to maximize your retirement contributions.
If you have access to a 401k through work, that is your best bet for contributing to retirement. The money you contribute won’t be taxed until you take it out for retirement. At the same time, you’ll lower your taxable income. You can also avoid taxes by contributing to a health savings account (HSA).
The money you put in an HSA won’t be taxed, and you can spend it on healthcare-related expenses without ever paying taxes on it. The more you contribute to retirement, the less you’ll owe in taxes at the end of the year.
10. Avoid Panicking
Taxes can be overwhelming, but there’s no reason to panic. There are plenty of resources out there that can help you figure out the complicated tax system. If you’re interested in learning more about tax tips, visit https://taxreliefprofessional.com/irs-tax-penalties.
Reviewing Top Tax Tips
If you use the tax tips laid out in this article, you should be able to maximize your tax refund and avoid paying unnecessary fees to the IRS. Anybody with complicated taxes may want to also consider consulting with a tax professional before they start doing taxes on their own.
Also Read: Getting the Most from R&D Tax Credits
