Would you rather file your taxes or go without your phone for a week? If you dread tax season as much as 28% of Americans, you’d probably voluntarily give up your cell phone just to avoid it. But since taxes are inevitable, the sooner you get everything in order the sooner you can shake off that looming stress and focus on things you love instead. Don’t be one of the 29 million peoplewho file their taxes at the last minute. Start preparing now and give yourself a head start on tax season!
Organize Your Documents
Tax time usually results in mountains of paperwork. The best way to avoid mistakes or miss out on possible deductions is to get all your documents in order before you start filling out your forms. Make sure you have records of the most common documents you’ll need, such as:
- W-2, 1099, or other records of income
- Records of charitable contributions over $250
- Information from prior years’ tax returns
- Rental income
- Mortgage interest and property taxes paid
- Dividend income
- Childcare costs
- Medical expenses
Make a master list of all the forms and documents you need, even using last year’s return to remind you what your unique situation requires. As each document arrives in the mail, check it off and add it to your pile. Your organizational efforts today will make filing easier and faster in the end. To make it easier, we’ve created a handy checklist for you - download it now.
Take Advantage of Deductions and Credits
Benjamin Franklin may have declared that “nothing is certain except death and taxes,” but that doesn’t mean you can’t do your best to reduce your tax bill. Fortunately, there are multiple credits and deductions that will not only benefit you this tax season but also serve to give your financial future a boost.
Explore Deduction Options
Just because we’ve turned the calendar to 2018 doesn’t mean you can’t maximize your retirement savings and reap the rewards on your 2017 taxes. If your employer offers a 401(k), you can contribute up to $18,000 in 2017. If you are over 50, you can also take advantage of catch-up contributions of an additional $6,000. If you don’t have the opportunity to save through an employer-sponsored plan, you can still invest in an IRA, depending on your income.
Contributions to HSAs (health savings accounts) are also an excellent option to reduce your total taxable income. The 2017 contribution limits for HSAs are $3,400 for an individual or $6,750 for a family. You can also make a $1,000 catch-up contribution if you are over 55.
For the 2017 tax year, you have until April 17th to contribute to HSAs, Roth and traditional IRAs, SEP IRAs and self-employed 401(k)s to benefit from this deduction, so jump on this opportunity to build your nest egg and reduce your taxable income while you can!
Some additional deductions that may also apply to you are state sales tax on major purchases, student loan interest, and medical and dental expenses.
Research Applicable Credits
Filing taxes can be painful, but depending on your situation you may be able to benefit from a variety of credits if you know where to look. Many Americans qualify for the Earned Income Tax Credit, and if you or your children attend post-secondary education, you could benefit from the American Opportunity Credit and the Lifetime Learning Credit. There are also credits for saving for retirement and child and dependent care. A qualified CPA will know what questions to ask and what to look for so you don’t miss out on any opportunities to minimize your tax bill.
Reevaluate Your Filing Status
Have you experienced a life change this year, such as marriage, divorce, or the birth of a child? Any of these milestones will affect your filing status, which determines your tax rates, deductions, and eligibility for credits. Make sure you are filing under the correct status so you don’t face unnecessary penalties or taxes.
Find A Professional You Can Trust
Did you know that over one million accountants are hired each year in America to help with taxes? There’s a reason for that. Working with a qualified and experienced accountant can make your tax season experience as seamless and stress-free as possible. They have the knowledge to help you claim all the deductions you deserve, account for many variables unique to your situation, and answer any and all questions you may have. Their expertise can save you money and give you peace of mind.
Not only that, but a CPA will also provide suggestions that will help you reduce your taxes for years to come, such as offering advice on tax-friendly ways to set up your estate and showing you the benefits of maximizing your retirement savings. Regardless of what your financial situation looks like, you can’t put a price on the value a CPA provides. At David Wealth Management, we are both CPAs and investment professionals. Our unique blend of services offers strategic tax planning that takes your whole financial situation into account.
Tax day is looming nearer, but don’t let that stress you out. Between now and April 17th, take these steps to get ready for tax season so you aren’t scrambling at the last minute.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.