Tax season is always looming ahead and it is a daunting process. Stepping into it for the first time can leave you confused and open to a lot of issues.
Making mistakes on your taxes can lead you to audits and missed opportunities for tax returns. You need to go into the tax season with an eye for the usual pitfalls and a helping hand.
Don’t worry, we have you covered! Here are 10 great tax tips to keep in the know this tax season.
1. Your Paycheck and Taxes Withheld
Your paychecks are the key factor for most of your tax issues. Outside of deductions and special items, your withheld taxes will be the biggest marker for the size of your return.
Taxes withheld are the percentage of each of your paychecks that went to the IRS to pay your taxes to the government.
How much is withheld is something you can set up and you should double-check this before you delve too far into tax season. The more taxes you had withheld, the more likely you will get a return instead of needing to pay the IRS.
The IRS has an estimation tool to help determine your withheld taxes.
2. When to Call in an Expert
While the basics of taxes can be easy, large deductions and radical changes in your life can complicate things. Don’t tie yourself in knots attempting it when esteemed help is right here.
The big tipping points for turning to a professional often include marriages, divorces, inheritance, big estate purchases, retirement, but there are many more.
Remember to look to professional help as far in advance of the April 15th deadline as you can. You will want as much time as possible in the case of complex deductions.
3. Knowing What You Can Do on Your Own
While a tax professional is the best option for your taxes, there are still several options and items you can deal with on your own.
If you have not had major life changes in the past year, then the process from your previous tax year should be almost identical to this year.
The changes with the Tax Cuts and Jobs Act in December of 2017 have begun their settling into the norm. With that, there looks to be little to no upsets in the near future in regards to your taxes.
Consultation with us is free and e-filing can be down in a variety of services.
4. Updating Beneficiary Designations
Beneficiaries aren’t the thoughts of everyday life, but they are a big part of taxes. At the end of the year, before tax season gets underway, it is a good time to look over your beneficiaries.
Uncertain of who you have listed as official beneficiaries? Your children often default, but without children, it is often up in the air. Without dependants, it may not be an issue, but if you have dependants it may become one.
5. Maxing out Retirement Plan Contributions
Retirement could be soon or far off. Either way, you should consider the implications of your retirement plan contributions.
Retirement plans, like 401k and 403(b), are not taxable income until you withdraw money from it during retirement. As such, whatever you put into them reduces your taxes for the year.
This can be a great way to not only prepare for the future but to save you from unneeded taxes early on.
6. Understanding Tax Scams and Fraud
Taxes are a big deal, dealing with a lot of sensitive information and money. You need to be careful about dealing with potential scams and fraud.
The first detail to understand is the IRS will never contact you outside of the United States Postal Service. If you receive any phone calls or emails claiming to be from the IRS, they are lying.
Promises of a bigger refund are also a big sign of fraud. Tax law gives you a maximum amount based on your deductions and income. You cannot receive over that maximum.
That is not to say that you can’t get more going to professional over doing it yourself, but that is about knowledge of deductions, not magical increases toward your refunds.
7. Managing Deductions
Deductions are the biggest part of income tax work outside of withheld taxes from income. Understanding them is vital.
The basics of deductions revolve around your payments to tax-deductible items. Charities or paying off the house mortgages are great examples of tax deductions.
You can “bunch” your deductions by pushing as many payments into one year. Prepaying mortgage payments and charity donations at the end of the year can help to pump up your deduction numbers.
8. Old Age and Required Minimum Distributions
When you reach 70 1/2 years old, you will need to start dealing with required minimum distributions, or RMDs.
RMDs are extra taxations on the retirement accounts you have built up in your age. Any 401k or other retirement plans will become free game for IRS tax revenue.
The amounts of your RMDs calculate based on your age and the amount in the accounts. A professional accountant would be best to balance the right mix of deductions and distributions in your accounts.
9. When to Deal With Mutual Funds
Mutual funds are another item that can affect your taxes but isn’t as obvious to how they affect them.
Mutual funds have timing on their distribution, and depending on when you purchase them can add up on your taxes. The best advice on their timings should come from a personal stockbroker.
10. Don’t Slack off at Tax Time
The last bit of advice may be simple, but if ignored can lead to a lot of headache and trouble. The official due date for your tax forms is April 15th and missing this date can incur a lot of penalties.
If you owed money, it can mean the IRS may attempt to hound you down, leading to aggravating phone calls and fines. If the IRS owed you money in return, you will have lost your one chance to reclaim your paid taxes.
Tax Tips From the Tax Experts
Tax seasons don’t have to be difficult. These tax tips will help you avoid most of the major issues and are a great start for any tax beginner. They don’t cover everything, though.
For complete guides on tax season and everything it includes, Gary M. Kaplan is the accountant you need. Contact him today and wipe away all your worries about the tax season and other accounting worries.
