Every taxpayer dreads tax season. Even if you are getting money back, there is so much that goes into filing taxes. The ultimate way to maximize your tax return is to hire a professional tax preparer. But, if you are looking to save money and do your taxes, here are some tips to help you maximize your tax return and, hopefully, a bigger refund.
Claim All Available Deductions
Many American taxpayers leave money on the table by not claiming all the deductions they can. The truth is some of the wealthiest among us pay next to nothing in taxes. This is because they take advantage of every deduction available. To discover all the deductions you can claim will take some research on your part, but that research can pay off BIG! Every deduction is subtracted from your adjusted gross income, which lowers your taxable income and puts money in your pocket.
Here are some common deductions to look for:
- Student loan interest deduction
- American Opportunity Tax Credit
- Lifetime Learning Credit
- Child and dependent care tax credit
- Child tax credit
- Adoption credit
- Earned Income Tax Credit
- Charitable donations deduction
- Medical expenses deduction
- Deduction for state and local taxes
- Mortgage interest deduction
- Gambling loss deduction
- IRA contributions deduction
- 401(k) contributions deduction
- Saver’s Credit
- Health Savings Account contributions deduction
- Self-employment expenses deduction
- Home office deduction
- Educator expenses deduction
- Residential energy credit
Your taxable income is the amount you pay taxes on; therefore, deductions can lower your taxable income and get you a bigger refund.
Use the Best Filing Status
Choosing a filing status seems like a simple task that won’t impact your tax returns. However, how you file can make a big difference, so it is best to try each of the filing statuses you qualify to see which one is most advantageous. For instance, you may be able to file single or as head of household. The head of the household carries some tax benefits, so it might be best to file that way. The same applies to married couples. Check which is the biggest advantage between filing jointly and separately. Here are the different types of filing status:
- Head of household
- Married, filing jointly
- Married, filing separately
- Qualifying widower
It is always best to try every way you can file. The extra time it takes to run through this twice can pay off in a bigger refund making it worthwhile.
Report All Your Income
Though reporting all your income won’t result in a bigger refund, it will pay off down the line. If you forget to report any income that an employer reported, it will trigger an audit, and the penalties can be harsh. Depending on how long it takes to be discovered (sometimes years) by the IRS, there could be some accrual of interest. If you realize the mistake, correct it as soon as possible, find out what forms are needed, and get it corrected. This will minimize possible penalties.
Meet the Deadlines
Meeting deadlines is imperative to maximize your tax return. The IRS has steep penalties for not reaching deadlines. Even if you get an official extension, you are still liable for late fees. The IRS charges several penalties, including one for failing to file promptly. It equates to 5% of your unpaid taxes and is charged for each month your return is late up to five months and has interest.
Check Your Math
As simple as it sounds, checking your math can save you hundreds and get you a bigger refund. Math mistakes are the most common reason Americans pay higher taxes or get fewer refunds on their tax returns. Take your time. Rushing will increase the likelihood of a mistake and use a calculator. There is also software that allows you to plug in the numbers, and it will do the math for you, which will ensure complete accuracy and maximize your tax return for a bigger refund.