Experience can be a good teacher, but we shouldn’t learn everything through our mistakes. For example, if the IRS penalized you last April because you underpaid your taxes, you can fix that for this tax year. Consider having your employer deduct more from your wages, or at least going the estimated tax payment route.
We may be halfway through 2015 but there is still time for you to map out a strategy for this year. Here are 3 things you can start doing right now:
- Get organized.Getting organized might not cut your taxes, but good record keeping avoids the number 1 and number 2 hassles of tax preparation: 1) Bad records keeping makes it impossible to do a thorough and timely job on your tax return; and 2) The IRS requires documentation if you get audited.To get organized, at a minimum you should:
- keep last year’s tax return handy
- use personal finance software to keep track of tax-related income and expenditures
- throughout the year collect and group receipts and papers that affect your taxes and keep everything in a separate file
- safeguard the W-2s, 1099s, bank interest, mortgage statements, etc., that typically arrive in January
- plan to store your files for at least 3 years (7 years is optimum, since IRS audits can go back that far.)
- Itemize your tax deductions.
- Visit the IRS website and see Topic 500 – Itemized Deductions. You will need Form 1040, Schedule A and its accompanying instructions. Before you get to Schedule A, however, there are deductions like IRA contributions that don’t need to be itemized and can reduce your taxable income. You’ll find them in items 31 through 38 on IRS Form 1040A and 48 through 54 on Form 1040. For each deduction you’ll need to attach a corresponding IRS Form.Don’t forget to look into tax credits, which can also reduce your tax bill dollar-for-dollar. They are, however, less common than tax deductions.
- Gather the tax forms you need.
- Go right to the source on this one. The IRS has a complete catalog of forms and publications on its website. While there’s still time, it won’t hurt to review the forms and instructions for changes or additional documentation. Make a list of the forms you need; download them and shake your head in wonderment at the enormously complex tax code we live under.Above all, be on time.The end result of all that planning is that you have a complete and accurate tax return ready for submission on or before the tax-filing deadline. Even if unforeseen circumstances keep you from meeting the due date, you still must make a reasonable estimate of your tax liability and pay any balance due with your extension request. Even though the IRS holds all the cards, your ace in the hole will be your preparation and planning.…And Get Help.If after reading all the advice above, you’d rather leave tax planning to experts so that you can get on with your life and business, consider working with a knowledgeable tax advisor. Contact Dmitry Dukhon at Dukhon Tax to help you get organized, file your returns and answer any questions you may have. We can be an invaluable resource for you to make the process as smooth as possible.
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