Lower Your Tax Payments and Increase Your Tax Refund

Legal Ways to Lower Your Taxes

By: Pam Grundy

Rating:

( 0 Votes )

Most people wait until right before they have to file to start thinking about how to reduce taxes and increase the size of an income tax refund.While late is better than never, the best strategy is to prepare for lowering income tax on next year’s personal return at the same time you are looking for money saving tax strategies on this year’s return.
Happily, there are a number of easy steps you can take right now to increase your tax refund and reduce taxes both now, and in the future.
Here are some tips and tricks:

Hire an Accountant

Tax software is great, and updates make it easier to use each year, but it’s also true that tax law is becoming more and more complicated all the time. An old saying advises, “You don’t know what you don’t know.” In other words, an accountant can see your unique tax situation instantly, and will be able to tailor your return to take advantages of deductions your software package might miss. Human beings see opportunities computers don’t.

Save All Receipts

You probably haven’t saved any receipts at all for the current tax year, but that doesn’t mean you can’t devise a simple system right now for next year. A letter-sized accordion file costs about $4 at any office supply store and can sit on your desktop or on a shelf, open, just waiting for receipts to be dropped in all year long. You can ask your accountant what categories are best, or if that’s too daunting, just write on the back of the receipt what it is for, toss it in, and sort the receipts at tax time.

Get Receipts for Non-Monetary Charitable Contributions

Lots of people give clothing, furniture, left over yard sale goods, and even cars to charity, but few people ask for receipts when they donate these items. Asking for receipts will allow you to deduct most kinds of charitable contributions at filing time, even contributions not made in the form of actual money.

Open an IRA

You can open and contribute to an IRA right up until April 15th and still claim the deduction on the previous year’s return. An IRA is one of the only kinds of accounts you can do this with. Keep in mind that Roth IRA contributions are not tax deductible, so if you are looking for the deduction, make sure you are opening a traditional IRA.

Check Out the Home Office Deduction Restrictions on who can take the home office deduction, and who cannot, have been loosened so that even people who do not primarily work out of their own homes or who do not meet clients in their homes, can now sometimes take a home office deduction.
So for example, if you have no fixed location for your place of work (as is true for some salespeople, doctors who consult at various hospitals instead of working at just one, etc.) you can claim the part of your home you use for administrative and managerial work as a home office, and deduct a percentage of the rent, mortgage, and utilities based on the square footage of that space.

Make a Last Minute Estimated Payment

If for some reason you are facing penalties because you underpaid your taxes (maybe your withholding was incorrect or you had an unexpected windfall), you can make an April 15th estimated payment and avoid the fees, so long as you didn’t also underpay during the first three quarters. Even if you did underpay all year, you can file Form 2210: Underpayment of Estimated Tax by April 15th, and reduce your penalties.

Itemize

Many people file the standard deduction when they could save a substantial amount of money by itemizing. You can itemize interest paid on a mortgage and property taxes paid, but you can also itemize lots of miscellaneous expenses like tax preparation fees, job hunting expenses, professional dues, excise taxes on automobiles (license plates), and state sales taxes (if they exceed the amount of state taxes you paid in the previous year). Medical expenses that exceed 7.5% of your gross income can also be itemized and deducted.

Get Organized

In addition to the expandable file you will be using to save all your receipts for next year’s taxes, print out a list now of other documents you will need, and staple it to a file folder your will use to store them so you can reduce taxes on next year’s return. This step alone will save you hours of time and potentially thousands of dollars.

Don't Overpay

Many people look forward to a large tax refund check each year, but consider that when you get a large refund year after year you are actually letting the government use your money for free. If you divide that annual refund into monthly deposits into a high yield savings account instead, you will at least earn interest, and if you invest what you would normally get as a refund into your IRA, you’ll have another deduction and an even better return over time. Although it doesn’t feel like it, paying a manageable amount each year at tax time is actually better than getting a large refund year after year.

Get Organized

With a little planning and a bit of organizational discipline, anyone can reduce taxes and save money. Get organized now, and next year will be even better than this year. The smartest money saving tax strategies are ongoing, so start some new habits today and look forward to keeping more of your own money tomorrow and every day after.

blog comments powered by Disqus

Inspiration...

Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like." - Will Smith
Be a Good Role Model When It Comes to Money...

More Quotes.....

Search Local Help & Info

Browse by state

  All Local Guides
  Alabama
  Alaska
  Arizona
  Arkansas
  California
  Colorado
  Connecticut
  DC
  Delaware
  Florida
  Georgia
  Hawaii
  Idaho
  Illinois
  Indiana
  Iowa
  Kansas
  Kentucky
  Louisiana
  Maine
  Maryland
  Massachusetts
  Michigan
  Minnesota
  Mississippi

  Missouri
  Montana
  Nebraska
  Nevada
  New Hampshire
  New Jersey
  New Mexico
  New York
  North Carolina
  North Dakota
  Ohio
  Oklahoma
  Oregon
  Pennsylvania
  Rhode Island
  South Carolina
  South Dakota
  Tennessee
  Texas
  Utah
  Vermont
  Virginia
  Washington
  West Virginia
  Wisconsin
  Wyoming

Hire an Accountant

Save All Receipts

Get Receipts for Non-Monetary Charitable Contributions

Open an IRA

Check Out the Home Office Deduction

Make a Last Minute Estimated Payment

Itemize

Get Organized

Don't Overpay

Get Organized

Inspiration...

Related Articles

Related Sites