Handling your income taxes is an exercise in your finances because you want to aim for an extraordinarily low figure. At first, it might be hard but you can be achieved honorably with the right skills and talent. Understanding the way it works can assist, whether you handle it yourself or you rely upon an accountant. Here are a few ways to manage your taxes like a pro:
Should I hire a professional or do my taxes?
Do you have the time and energy to learn tax-related laws to ensure that you can file a legally viable tax return or eliminate any chances that you may make an error and subsequently pay a fine or experience delays in your return? If the answer is no, then you need professional services. When it comes to whether you should file your taxes, there is some general rule of thumb to follow. However, if you are on a budget, you should consider filing it yourself.
When it comes to filing taxes, you can either do it yourself with tax software or hire a tax professional. By using the software, not only do you have to learn how to navigate through said software, but you also have to learn about tax-related laws less you run into obstacles. However, this is a more cost-effective solution compared to using a tax preparer which you may end up paying like $100 or more depending on the area of which you live.
Things To Know Before You Start Your Taxes
Regardless of what option you choose, there are some things you will need to do to ensure your paperwork goes through smoothly.
Check Your Paycheck
One major tip that is worth noting is to double-check your paycheck. If you have not had sufficient tax withheld, you may end up owing. Alternatively, if too much is being withheld, you get a refund. Therefore, be sure to check your paycheck.
File Taxes Early
By filing your taxes early, not only will you get your return sooner, you will be at a lower risk of being a victim of tax fraud as it mainly affects people who file late.
Report Tip Income
The IRS specifically states that employees should report tip related income on their tax return.
Determine the Right Filing Status
Your filing status dictates how much you save or pay in taxes. If your filing status is incorrect, it will inevitably lead to an audit. Your filing status also dictates which credits and deductions you can make on your account. As such, you will want to ensure you get this right above all else.
How To Get More Money Back On Your Taxes
Itemize Your Deductions
One thing you can do to maximize your refund is to itemize your deductions. Even though the government allows you to make a standard deduction, this may lead to you paying more taxes than you are required to do legally. However, by itemizing each deduction it can save you hundreds and sometimes thousands of dollars.
Exemptions And Tax Credits
In simpler terms, exemptions allow you to get a tax discount for being a contributing individual of society. For instance; being married or having children are called exclusion. When you list exemptions on your tax return you end up paying fewer taxes. As of 2011, you can reduce your taxes by as much as $3,700 for each exemption you claim. On the other hand, tax credits operate like a reverse discount, in the sense that a $1000 tax credit means you will pay $1000 less in taxes. For instance, If you own a solar panel system or energy-efficient devices that consume less New York electricity, you may be eligible for tax credits.
Do Not Take A Rapid Refund
Don’t take any instant or rapid refund that may be offered by a tax expert. This so-called “rapid refund” option is a short term loan which will reduce your tax return. However, you might be getting yourself in to an expensive “loan,” and you pay more for services you do not really need. You can file your taxes electronically and use direct deposit for your refund, you should get your money within 21 days.
In conclusion, you can take a little time and energy to implement these tips to make you get ready for tax season. Also, whether you are hiring an expert or not, you will be able to eliminate the stress and worry if you prepare your records.