Here are nine tax-saving tips for the New Year. Use these strategies to save money and avoid penalties when preparing your tax return. All in all, these 10 steps will lower your blood pressure while keeping more money in your pocket:
1. Contribute to retirement accounts
If you haven’t already funded you retirement fund for 2017, do so by April 17, 2018. That’s the deadline for contributions to a traditional IRA, deductible or not, and to a Roth IRA. Making a deductible contribution will help you lower your tax bill this year. Plus, your contributions will compound tax-deferred. It’s hard to find a better deal.
2. Make a last-minute estimated tax payment
If you didn’t pay enough to the IRS during the year, you may have a big tax bill staring you in the face. Plus, you might owe significant interest and penalties, too.
How could this happen? Withholding on your paycheck may be out of whack, or you may have received a big gain from selling stock. According to IRS rules, you must pay 100% of last year’s tax liability or 90% of this year’s tax or you will owe an underpayment penalty.
3. Organize your records for tax time
Good organization may not cut your taxes, but there are other rewards and some of them are financial. For many, the biggest hassle at tax time is getting all of your documentation together. This includes last year’s tax return, this year’s W-2s and 1099’s, receipts and so on.
4. Itemize your tax deductions
Taxpayers sometimes overlook miscellaneous expenses, which are deductible if the combined amount adds up to more than 2% of your adjusted gross income. These deductions include tax-preparation fees, job-hunting expenses, business car expenses and professional dues.
You can also deduct the portion of medical expenses that exceed 10% of your adjusted gross income.
5. Don’t shy away from a home office tax deduction
Many taxpayers have avoided the home office tax deduction because it has been regarded as a red flag for an audit. If you legitimately qualify for the deduction, however, there should be no problem. You are entitled to write off expenses that are associated with the portion of your home where you exclusively conduct business (Such as rent, utilities, insurance and housekeeping).
6. Provide dependent taxpayer IDs on your tax return
Be sure to plug in taxpayer ID numbers (usually Social Security Numbers) for your children and other dependents on your return. Otherwise, the IRS will deny the personal exemption of $4,050 in 2017 for each dependent and the $1,000 child tax credit for each child under 17.
7. File and pay on time
If you can’t finish your return on time, be sure to file an extension with the IRS before April 17, 2018. Filing an extension gives you a six-month extension of the filing deadline until October 15, 2018.
8. File electronically
Electronic filing works best if you expect a tax refund. Because the IRS processes electronic returns faster than paper ones, you can expect to get your refund three to six weeks earlier.
9. Decide if you need help
Wicks Emmett can handle the most complex returns with ease. If you are concerned about preparing your own return, you can talk to a tax professional at Wicks Emmett to get your questions answered. Working with a tax professional will give you added confidence and peace of mind.