Tax season brings confusion and anxiety for most taxpayers, but you can ease the stress with 10 tips. These tips also maximize your tax results and guarantee your financial readiness.
1. Review your W-4. Personal changes like a marriage or adoption change the number of dependents you can claim. The information on your W-4 also affects the amount of money your employer withholds from your paycheck. Make changes to your W-4 for savings.
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2. Get organized. Forget the April 14 rush to gather receipts and other paperwork. Throughout the year, file any paperwork you might need. Examples include deductible expenses, childcare expenses and retirement account deposits.
3. Maximize deductions. Medical expenses must reach 10 percent of your income to qualify for a deduction. You’ll also want to save receipts for charitable donations, and postmark these gifts by December 31. Additionally, contribute the maximum amount to your retirement account to reduce your bill.
4. Choose a filing status carefully. Life events may change your filing status so choose the status with the best tax results.
5. Plan to pay more taxes. Higher income earners pay more taxes in 2013. If your individual income is above $400,000 or above $450,000 as a married couple, you’ll pay 39.6 percent income tax.
6. Pick the right form. The 1040EZ offers only the Earned Income Tax Credit (Source). The longer 1040 offers an education and other credits. Choose the form that gets you the best result, even if it’s a more complicated form.
7. Hire a professional. Your tax preparer should be a Registered Tax Return Preparer with year round availability.
8. Prepare for your appointment. Make your preparer’s job easier and speed up your refund when you take all the necessary paperwork to your initial appointment. You’ll need your organized receipts, proof of income and social security numbers for any dependants.
9. Ask for an extension. If you can’t complete and file your return on time, an extension prevents penalties and interest.
10. Always sign your return. The IRS can’t process a return without your signature, and this mistake is a common one taxpayers make.
Are you ready for the 2013 tax season? These 10 tips can help reduce your stress. For additional assistance, talk with a Financial Readiness program manager at ACS or ArmyMWR.com.