It’s never too early to begin arranging for tax season, and if you want to make the most of your income and get as much back as you can from the government agency, be sure to keep these essential tax tips in mind:
Reassess your income status
Filling status can significantly affect the size of your refund, especially for married people. Most married couples choose to file a joint return, but filing jointly won’t always give you the best return on your tax refund. Joint and separate filing are not the only filing status designations you can choose. Suppose you care for your dependents, whether your children or elderly parents. You may be qualified to file as head of household. It can significantly reduce your tax bill and result in considerable savings.
Entering online is better than sending by mail
E-filing helps you save paper, save trees, and benefit the environment; however, the rewards don’t end there. Electronic filing saves time and money for both you and the IRS. E-filing can provide important peace of mind. After you acknowledge your application online, you will receive an immediate acknowledgment from the IRS.
Be sure to itemize your deductions
When it’s a moment to file a claim, you must decide about itemizing your deductions. Your choices are as follows:
Take the Standard Deduction: If taxes are straightforward, the government agency likely won’t take you through a complex filing process to qualify for the deductions you’re owed. The standard deduction can be worth between $5,800 and $11,600. Most taxpayers choose this option.
Itemize your deductions: You will list each deduction you qualify for if you select to itemize your beliefs. It can be a complex process, but it can be a lucrative move to itemize your deductions. If the sum of all your tax deductions exceeds the standard deduction, you’ll get more back by itemizing your deductions. Expenses that taxpayers can often itemize include charitable donations and high medical costs.
Always file a return
While the IRS offers ample time for taxpayers to file, many do not file a tax return. In most cases, taxpayers choose to forgo filing because they don’t have enough money to cover the taxes due. Avoiding the IRS is not the way to go. If you can’t pay your tax debt, always file a return. Penalties for fault to file can be severe. If you anticipate taxes due this year, be sure to make estimated payments during the intervening months before filing.
Take advantage of little-known deductions and credits
Every year, taxpayers miss out on lucrative deductions and credits simply because they didn’t know they existed. Sometimes, taxpayers may know deductions and credits are available but mistakenly believe they don’t qualify.
Maximize your retirement plan contributions
Whether you have an IRA or an employer-provided 401(k), contribute the maximum amount possible. Your employer must match your contributions. Contributions can provide several benefits, whether you have an IRA, traditional, or Roth. The amount of the credit can be 10%, 20%, or 50% of your retirement plan or IRA contributions, up to a maximum of $2,000 if you file individually. The percentage depends on your adjusted gross income.
Understand your health coverage
You must know what you must report to the IRS about your health insurance. Under the Individual Mandate, or the Individual Shared Responsibility Provision, everyone who can afford health insurance coverage must purchase a policy or pay a tax penalty for not doing so. When considering your health care coverage as it pertains to your tax returns, keep these necessary forms in mind:
- If you claim the Premium Tax Credit, you will need to use Form 8962
- If you signed up for health coverage through the Health Insurance Marketplace, you should receive Form 1095-A
- If you claim an exemption from health coverage, you must use Form 8965
Maximize your ion tax savings
If you, your wife/husband, or your dependents had higher education expenses in the last year, you might be able to get some significant tax savings. There are two main types of education tax credits:
- The American Opportunity Credit: This credit can save you up to $2,500 in taxes on higher education expenses for each eligible student in your family. This credit only applies to students enrolled for at least half-time status during an academic term and must be in their first four years of attendance.
- The Lifetime Learning Credit: This credit can save you up to $2,000 in taxes. It is available to taxpayers who attended at least one course at an eligible institution during the year. You can use this credit to cover costs incurred for tuition and fees or books and supplies that require purchases.
Don’t ignore the IRS
Our most crucial tax tip? Never ignore the IRS. Even if you can’t pay your tax debt, don’t pretend the problem doesn’t exist. When you get a Notice of Deficiency for back taxes or any other type of letter from the IRS, act quickly and secure the IRS’s help to ensure you don’t incur harsh penalties and interest.
Sometimes, you should call a professional
If you’ve been having trouble with the IRS or are worried about making a costly mistake while filing your taxes, it may be time to seek the help of professional tax resolution services. Our accounting and tax relief services include:
- IRS Debt Settlement
- An offer in compromise
- Stop wage garnishment
- Filing of tax extensions
- Tax Penalty Reduction
- Prevention of collection and embargo
- Customized tax solutions
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