Tax preparation, calculating, and paying them can be a headache. The amount of details involved in the process is staggering. Although it may seem like a challenging task, understanding, and planning for tax season is easier than you might think. Here are a few simple tips that people can follow to make the process smoother.
Decide Who Is Preparing Your Taxes
Filing taxes could be more complicated than usual if you experience major life changes, like getting married or divorced, starting a business, filing for unemployment benefits, or otherwise changing your tax situation. That’s why it’s great to hire an accountant to help you keep things straight. But don’t wait until April to call around for quotes. Start now so you can compare the quotes and pick a reliable accountant.
Check out Free Alternatives
If you cannot afford professional tax help and do not have a high enough income to be eligible for the IRS Free File program, you may still be able to file your income taxes without paying a cent. The Free File Alliance allows some of the largest tax preparation companies in the country to offer their services to low-income taxpayers.
Maximize Retirement Contributions
If you haven’t been contributing to your employer-sponsored 401(k) or 403(b), now is a good time to start. The money you put away towards this reduces your taxable income, which reduces your tax bill. You also get a tax break when you make withdrawals in retirement, so you don’t have to pay taxes on the money until then.
Protect Yourself from Scams
As tax season approaches, many people receive phone calls, emails, and text messages from scammers claiming to be the IRS. Do not give these fake IRS representatives any personal information involving your name, Social Security number, or bank accounts. The IRS won’t ever contact you via phone to ask for immediate payment or ask for credit or debit card numbers.
Try Bunching Deductions
To maximize your deductions, we have a recommendation. First, you might try bunching, which is the process of shifting deductible expenses into a single year. One way to do this is by carrying forward certain deductions into this year. For example, you could make a sizable donation to a charity or pre-pay January’s mortgage payment.
