Tax preparation is one of the most distressing time for taxpayers across the globe. If you have all your papers in order before the tax season begins, you would be spared the agony of the last-minute hustle-bustle one has to undergo during a mismanaged tax preparation. If you wish to be well prepared for the coming tax season, here are some tax tips and advice that can help you regulate the entire process of filing for your returns.
- File as soon as you can
One of the best tax tips and advice you would ever receive would be to file your tax returns as soon as you can. The logic behind this tax tip is that the sooner you file your returns, the faster your refunds will be processed. If you file your tax returns at the right time, it will leave you with more time to deal with issues that arise in the meantime. Also, filing your returns sooner ensures that fraudulent entities do not have the time to file false claims under your name.
- Maximize your retirement contributions
Almost every employer offers a 401(k) or other pension plans to their employees. In such cases, you should try to contribute the maximum amount allowed by these policies if the employer matches your contribution. This ensures that the money, which would have otherwise been deducted as the tax, would become a part of your retirement plan. In case your employer doesn’t offer a retirement plan, you can contribute to the traditional Individual Retirement Account (IRA) or a Roth IRA, whichever you consider beneficial. This is one of the most followed tax tips and advice.
- Protect your identity
Every taxpayer is given an Identity Protection (IP) Pin. The IP Pin is a six-digit number that is assigned to eligible taxpayers to prevent fraudulent returns from being filed under the taxpayer’s Social Security Number. So, when you receive your IP Pin, ensure that you do not divulge this to anyone since this can lead to malicious entities trying to make fraudulent claims against your name. Also, this IP Pin changes every year, so keep track of this pin and do not share it.
- Adjust your withholding
It is imperative that you adjust your withholding. You will have to check your year-to-date withholding and might have to consider changing the taxes that you have withheld in case you are expecting a large refund. This process has to be undertaken if you have decided to claim the earned income tax or EITC. As per the new law, the IRS has to hold all the refunds on the returns till February 15. This is done with the intention of detecting and preventing tax frauds. If you wish to adjust the amount of tax withheld, you must fill up the W-4 form and submit it to your employer.
- Seek your income tax credit
Seeking your income tax credit is imperative since it is your money you would be claiming. According to the IRS, one out of every five workers does not claim the valuable income tax credit that they have earned. In order to receive this income tax credit, ensure that you file a return for the same.
- Declutter your assets
Decluttering your assets is one of the easiest tax tips and advice you would receive, but it goes a long way in helping you manage your funds. Before you begin your tax preparation process, segregate the items that are of no use for you but are in good condition. Certain items like books, electronics, clothing, household items, etc. can be donated to charitable organizations instead of cash. In such cases, the deduction depends upon the item’s real market value. If the noncash items account for more than $500, then fill up form 8283, the Noncash Charitable Contributions.
- Get your health coverage in order
People often neglect to get their health coverage in order since they trivialize the importance of health coverage when one prepares their taxes. It is essential that you and your family at least have minimum coverage to qualify for a health coverage exemption as per the shared responsibility provision. If this is not the case, you will have to make individual shared responsibility payments for the exact period for which you didn’t have coverage or an exemption. So, all you have to do is ensure that you had health coverage throughout the entire financial year.
Usually, people often seek tax preparers to help them in the endeavor of filing their tax returns. However, these days, even you can prepare your tax returns if you are equipped with a tax preparation software. One such popular tax preparation software package is the TurboTax. This company guarantees 100% accurate calculations and readily reimburses its users if they lose money due to erroneous calculations by TurboTax. This software is quite useful since it is hassle-free and easy to use. So, you can use TurboTax or similar tax preparation tools to help you file your tax returns effectively.