January 20, 2014 will be here in no time! I have some tips to hopefully make this tax season less painful and more lucrative.
1. Keep track
If you itemize deductions, start keeping track now (or gather what you’ve already spent) of whatever they are. Whether you create a folder on your computer, in your email or have an actual envelope for receipts, start putting everything all in one place so you don’t need go searching come April. Depending on what industry you work in you might even be able to deduct things you didn’t realize. For instance if you work in entertainment, your cable bill, magazines and even movie tickets can be deducted. Work in sales? If you drive you can deduct your gas, tolls, parking, even car insurance. Be sure to ask your accountant what you can deduct for your job. And don’t forget those charitable donations!
2. Ask around
If you don’t want to do your taxes yourself, or maybe you just want to try another accountant, ask around. Talk to friends and family about who they use and why they like their accountant. This way you can get a head start. Many of them even use worksheets to track your documents and deductions so you might want to request this ahead of time. One of our sponsor brands, KP Tax Service has a user-friendly platform to help you get through it if you’re looking to brave tax season on your own!
3. Review and assess
Didn’t get a refund last year? Or did you owe more than expected? Talk to your accountant and/or review your return to see why. A few things you can look into for this year:
- Increase your withholding: Check your pay stub? Do you declare yourself as married? Change it to married but withhold at single rate. Or even just single. This means they take out more each paycheck and you owe less at the end of the year. You can also ask the state or federal government to take out extra money each paycheck. This could be as little as $10 but might mean the difference between getting hit come tax time.
- Participate in a 401K: If your company matches, this is a no-brainer. But even if they don’t, since this is pre-tax, it means you’ll be taxed on less income and again, might owe less in years to come.
- Participate in an FSA: If your company allows you to participate in a Flexible Spending Account, for either dependent care (child care) or medical, this is also done pre-tax and will help you get taxed on less income at the end of the year.
- Participate in a transit program: Here in NY we have WageWorks, a program that allows you to pay with your paycheck for public transportation, up to a certain amount. Again, this is done pre-tax and since it’s something you need to buy anyway, it pays (!) to deduct this from your paycheck.
- Open an IRA: Depending on your circumstances, you can open an IRA up until the tax deadline and may be able to claim a deduction on your individual federal income tax return for the amount you contributed to your IRA.