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Hey there, can’t believe its already December! I am sure everyone is making sure they are prepared for filing there tax return in just a few months. I wanted to share four tips to ensure compliance while minimizing taxes.
Make a tax plan and make it early.
One of the first things you need to determine – Does it make sense to itemize your deductions? My post on itemized deductions will help you make this decision. This decision will determine the documents you need and how you file. If you use the standard deduction, you do not have to worry about records for- medical expenses, donations, property taxes, mortgage interest and more.
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Once you decide if you can itemize deductions you can make a plan and keep track of you records. If you are very close to the standard deduction threshold- consider making more charitable contributions this year to bump you over the threshold. Maybe get that dental procedure done in December instead of January.
Also, do some research on your industry and life stage– there are many credits/deductions available. For example, a teacher can deduct $250 for school supplies and students can deduct student loan interest up to $2,500.
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Keep your tax records organized.
You can’t deduct what you can’t remember (or support). In order to support deductions and credits, you have to be able to locate records easily. Especially if your return gets selected for an IRS audit. As always- place your W-2 and 1099s in a safe (remember-able) place until you have all the information you need to file.
Report all income from W-2s & 1099s.
An easy way to get the IRS to notice your return- in a bad way- is not matching information the IRS already has. All W-2s and 1099s are submitted to the IRS and they use a system to match that information to your return. So always double-check that you are capturing all the information on those forms. There are some sneaky little boxes on the W-2 that you have to look out for— like box 12. Most tax software packages are very intuitive and makes this process easy. Tip– it’s always a great practice to have someone double-check your input into the tax software.
File & Pay on time
…but really. Your personal tax return is due April 15th. If you do not make the deadline, large penalties and interest will accumulate. It may also hinder things like getting a mortgage! Ouch. Learn all about filing an extension here. Spoiler alert: an extension only extends the time you have to file. It does not extend the time you have to pay your tax bill.
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