Before people know it, tax season will be upon them. They will find themselves engrossed in paperwork, trying to figure out how much they owe to the Internal Revenue Service (IRS). Most importantly, they occupy themselves in finding out how much money they will get back in their tax refund.
People who faced disappointment last year because they paid higher taxes, and received a minimal tax refund, should work towards increasing their tax refund before January 1 arrives. Increasing your tax refund is not an impossible or difficult feat, and it is quite easy. In order to qualify for higher tax refund this year, people need to follow these tax tips:
1. Collect Receipts And Forms
People should not wait until the last minute to collect receipts and forms, but should start collecting them at least a month earlier before their taxes are due. In doing so, you will not forget to file everything when you sit down to perform your taxes, as you will have everything in one place.
2. It Is All About Timing
One eye should be on the TV, and the other eye should be on the calendar. You need to watch the calendar closely, especially when tax season is around the corner. People who need to pay their mortgage should make an extra mortgage payment on December 31st. This will increase their mortgage interest deduction.
Other things you should take care of before December arrives is to make an appointment for any due medical examinations and screenings, and paying property taxes before the start of the new year.
This will increase people’s medical expense deduction, and paying their property taxes early can make the difference between opting for the standard deduction and itemizing, meaning people may be applicable for a bigger tax refund. Self-employed individuals should pay their taxes in December to increase their itemizing gain.
3. Learn About Available Tax Credits
Most taxpayers are unaware of the many tax credits that are available to them. For example, many people end up not claiming their earned income tax credit (EITC). People who meet the eligibility requirements of EITC can claim it. People with children can claim the child-care credit. Parents with children who are off to college can claim the American Opportunity Tax Credit, and get almost $1,000 back. Since tax laws are ever changing, people should stay informed about the latest reforms that can reward them financially.
4. Say No To Bonuses
Say no to bonuses, at least until January. People who are due for a bonus should try to postpone it, as by accepting it, it will increase their taxes. If they want their taxes to remain low at the time of filing, they should talk with their employer to see if they can get their bonus in January of next year.
5. Be Charitable
Since tax season is so close to the holidays, people need to give back to the poor and needy, as it will help them lower their taxes. Even if doing so did not decrease your taxes, you should still give back to people in need of clothes, and food. Volunteer at a charitable organization so you can qualify for the mileage deduction, non-cash deduction, and monetary deduction. Remember to donate by December 31st or else it will not count.
6. Join A Class
Sign up for a career class can increase people’s tax refund. You may be applicable to receive almost $2,000 if you sign up before December 31st.
7. Contribute To Your Retirement Savings
People can decrease their taxable income by contributing to their retirement fund. People can contribute to either their 401k plan, or a normal IRA savings account. This will reduce their taxes, and increase their savings. For the year 2015, the contribution limit for the 401k plan is $18,000, and for a normal IRA savings account, it is $5,000. However, for people who are 50 and older, the contribution limit may differ.
8. Empty Out The Flexible Spending Account (FSA)
People who still have money left in their FSA account should spend all of it, as they will only be able to carry over about $500 into their FSA account for 2016. You need to spend all of the money in the account before December 31st. Conversely, your plan may state a different time duration you are allowed to spend the remaining money from your FSA account.
9. Sell Losing Investments
Investors need to look through their investment portfolio to identify which investments have decreased in value. Next, they need to sell their losing investments to counterbalance their winning investments. Investors who have more losses than gains should submit $3,000 of that against their daily income.
10. Apply For Marketplace Insurance
People applying for Marketplace Insurance for 2016 need to estimate their family size, and household income. They need to look at the changes they may encounter in 2016 such as a promotion at work, children, retiring, and more. The changes in your personal life will influence the subsidiary amount you receive to pay for your insurance.
On the other hand, people who took out Advanced Premium Tax Credit to assist them for Marketplace Insurance should work towards lowering their adjustable gross income. They can decrease their adjustable gross income by adding money to their retirement plan, which will increase their premium tax credit they are eligible to receive during tax season. People applying for Marketplace Insurance can use half of their Advanced Premium Tax Credit to pay for it.
This tax season, be wise. You need to work on reducing your taxes, and increasing your savings, which will only be possible if you follow the aforementioned tips. One of the most hectic times of the year, besides the holidays, is tax season. If you are unable to perform your taxes by yourself, you can always hire a CPA, an accountant, or a tax professional to help you with them. Have fun saving money on taxes this year!