Tips to Help You Lower Your Tax Bill Next Year
No one wants to pay taxes and it is much better to receive a refund, but you may not always have one waiting for you. Before you have to sign your name in cursive on a check to the IRS again, consider the following ways to help you lower your tax bill next year.
The idea behind planning is to be prepared for things that come up unexpectedly. The more prepared you are, the better your situation will turn out. Instead of waiting until the end of the year to start planning for your taxes, start at the beginning of the year for that year’s taxes.
Look through all of your tax paperwork and see if there are any ways that you could have prepared better. Maybe you could have held on to more receipts, or maybe you could have sought out tax help when you did not understand some of the questions being asked.
Take some time to sit down and figure out what you want to do differently to achieve better results on your taxes this coming year.
If you are having trouble holding on to your money or you find you are constantly making withdrawals from your IRA and taking a tax hit, speak with a financial advisor.
He or she will be able to sit down with you to plan out your personal finances and help you avoid pulling money out of your accounts as often.
If you end up owing money on your taxes year after year, you should consider having a quarterly evaluation performed. This evaluation will look over your taxes to ensure you are on the right path. Typically, the evaluation will catch any issues that may arise and if you do end up owing taxes, you can make quarterly payments to keep your end of the year costs down.
If for some reason you overpay on your quarterly taxes, you will owe less at the end of the year or you may see the overage back as a refund in your account.
One reason that quarterly checkups work so great is because you are able to better plan for the taxes that you will owe and you do not have to worry about a huge tax bill come the end of the year. If you have never done quarterly payments before, consider adding this into your planning for the new tax year.
Another approach you can take is to pay taxes as they arise for you. For instance, if you sell an investment property at some point during the year, you may be able to wait to claim the income on your tax return, but then you may not have the money to pay the IRS at that time.
What you can do is make an estimated tax payment now to avoid such a large amount when you do file your tax return. You are able to make estimated payments throughout the year to help keep your tax bill down.
If you have an IRA or a retirement account, you may qualify to make deductible contributions to it. When you do make these contributions, you may be able to lower your tax bill at the same time, which in return helps you save money.
Before you make any contributions though, decide the type of account you want as many do have limits on how much you are allowed to contribute per year.
Also, remember not to contribute too much as you will face a penalty if you need to withdraw it. Only contribute what you are willing and able to part with.
Changing your income tax withholding can help lower your tax bill at the end of the year. The more money you have withheld from your paycheck, the less of a bill you will have and quite possibly, you may have a return waiting for you.
If you do end up owing at the end of the year, the amount taken out of your checks throughout the year will lower the amount you pay.
If you are having trouble managing your taxes effectively or you feel like you need help lowering your tax bill, speak with a tax professional. He or she can help you minimize your tax bill while helping you claim all available credits and deductions.
Financial Balance LLC