It may be March, but that doesn’t mean you’re too late to implement some essential tax tips this year. Perhaps we procrastinators are in even more desperate need for quality tax advice.
Whether you’re delayed on filing or interested in improving your odds at a bigger return next year, we may be able to help. Read through our top 8 tips and be sure to pocket anything you didn’t already know—your bank account may thank you.
1. Maximize Retirement Contributions
One of the savvier tax tips is to make sure you’re contributing as much as possible to your retirement account—this amount can be claimed on your tax return. You risk leaving money on the table otherwise.
Even if your employer or corporation doesn’t offer an incentive matching program, that money is tax-deferred and grows tax free.
2. Adjust Your Withholding
As you think about work and your retirement account, consider adjusting your withholding amount on your Form W-4.
If you need a larger return, having more money withheld from your paycheck each month might be a small change you hardly notice, but benefit from later on.
3. Double Check Available Deductions
You have two options: claim a standard deduction (one lump amount) or itemized deductions (individual expenses). The former is more convenient, but the latter leaves room for some serious savings.
Here are some write-offs you might have overlooked:
- Sales tax—Deducting tax on items such as an engagement ring or car might get better savings than if you were to claim state income tax.
- Medical expenses—Medical expenses and insurance premiums may be deductible if they exceed 7.5 percent of your adjusted gross income (AGI) for the 2021 tax year.
- Charitable gifts—Get a reward for your good deeds and claim the donated amount on your tax return.
- Business expenses—Keep those receipts; if you can prove an expense was related to your business venture, you might be able to write it off.
- Moving expenses—If you had to move for work, keep track of all the incurred costs. Even if you received a sign-on package, the IRS might have more benefits to offer.
- Looking for work—Qualifying expenses (such as gas mileage and resume printing) that exceed 2 percent of your AGI may be deducted to offset the impact of losing your job.
4. Remember, Your Kids Count
Parenthood can be rough—and expensive. The IRS is sympathetic and may allow parents to claim credits for:
- Childcare expenses for babysitters or daycare
- Educational credits
- Child Tax Credit
- Additional Child Tax Credit
5. Be Judicious
That said, you need to be judicious when looking for the maximum amount of tax credits possible.
Claiming that new, in-house movie theater as a “home office” or your beloved fur baby as a dependent child could set off some red flags and lead to an audit.
6. Save All of Your Documents
With audits in mind, make sure that you are diligently keeping track of all your records and get organized when filing your return.
Think twice about deducting anything you can’t find documented proof for; if the IRS rejects your request, you could wind up owing a lot of money.
7. Hire Hands-on Help
The best practice is to take your bundle of documents to an enrolled agent or tax professional who can go through your records with a fine-tooth comb. He or she might cost money upfront, but they will almost certainly get you more money back on your return than you’d be able to achieve by filing for free online.
8. File and Pay on Time
Whether you hire a professional or file yourself, do your best to file by the April 15th deadline. Failing to do so will earn you some hefty penalties and potential interest charges for each month your taxes go un-filed and/or unpaid. If you know you’re going to be behind this year, request an extension ahead of time for free online. Always file on time regardless as to whether or not you can pay your bill; the failure to pay penalty is much more lenient, and the IRS offers payment programs to work with you.
Taxes are never fun, but that check you receive for your return can be. Take a few extra moments to make sure you’re getting the most out of your return and your effort could be well-rewarded.
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