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The Top 10 Things to Know Before Hitting the Submit Button on Your Taxes

Tax season can be a stressful time for many individuals and businesses. However, with the appropriate financial planning, you can discover ways to file your taxes more effectively. Before you hit that submit button, here are ten things you should know.

Understand Your Tax Filing Status

Before you begin your tax return, it's important to determine your tax filing status. Your filing status affects your tax rates, deductions, and eligibility for certain tax credits. Common filing statuses include single, married filing jointly, married filing separately, head of household, and qualifying widow(er). Choose the one that best suits your situation to minimize your tax liability.

Resource: https://www.irs.gov/help/ita/what-is-my-filing-status

Organize Your Financial Records

Good record-keeping is an important step to accurate tax reporting. Gather all relevant financial documents, including W-2s, 1099s, investment statements, mortgage interest statements, and receipts for deductible expenses. Ensure your records are complete and organized, making the tax preparation process smoother.

Resource: https://www.principal.com/individuals/build-your-knowledge/5-steps-organizing-personal-finances

Maximize Deductions

Take advantage of deductions to reduce your taxable income. Standard deductions include mortgage interest, state and local taxes, charitable contributions, and medical expenses. Consider tax-saving strategies like contributing to retirement accounts and using flexible spending accounts. Year-End Planning Checklist

Understand Tax Credits

Tax credits help reduce your tax liability, making them highly valuable. Familiarize yourself with credits like the Earned Income Tax Credit (EITC), Child Tax Credit, and education credits. These can provide significant tax savings, especially for families and low-to-moderate-income individuals.

Be Aware of Tax Deadlines

Completing your taxes before the tax deadlines helps you avoid penalties and interest. The typical deadline for individual tax returns is April 15th, which may vary due to weekends and holidays. Extensions are available if you need more time to file, but paying any owed taxes by the original deadline is crucial to avoid penalties. To learn more click here: https://www.irs.gov/forms-pubs/extension-of-time-to-file-your-tax-return

Consider Tax Software or Professional Help

Depending on your financial situation, you may use a tax preparation site like TurboTax, or may consider consulting a professional tax advisor. Using a tax preparation site like TurboTax can be cost-effective and consumer-friendly, but if you have more complex situations, you might want to consider an expert guide.

Keep an Eye on Tax Law Changes

Tax laws can change yearly, which impacts your financial planning. Stay informed about any recent tax law revisions that may impact your return. The Internal Revenue Service (IRS) website is a valuable resource for updates, and a tax professional can provide expert guidance on the latest changes. State taxes also change frequently; visit your state websites to learn about new tax laws. 

https://www.irs.gov/privacy-disclosure/tax-code-regulations-and-official-guidance

Explore Tax-Efficient Investment Strategies

Investors should use smart tax strategies to reduce taxes on their investments. This includes tactics such as tax-loss harvesting, holding onto investments for the long term to qualify for lower tax rates, and making the most of tax-advantaged accounts. These approaches help maximize your investment returns by minimizing the impact of taxes.

https://www.nerdwallet.com/article/taxes/tax-loss-harvesting#:~:text=Tax%2Dloss%20harvesting%20involves%20selling,investment%20after%20a%20certain%20timeframe.

Review Retirement Contributions

Contributions to retirement accounts, such as 401(k)s and IRAs, can reduce your taxable income while securing your financial future. Consider your retirement contributions and increase them to maximize the tax benefits.

Double-Check Your Return

Before submitting your tax return, make sure to review it carefully. Check for your personal information, income, deductions, and credit accuracy. Filing an incorrect return can lead to delays, audits, and potential penalties. Accuracy is crucial when it comes to taxes.

Handling taxes may seem overwhelming, but it's crucial for managing your money. Knowing the top 10 things before filing can help you take charge, lower your taxes, and follow tax laws. Whether you do it yourself or get help, staying informed and organized is the key to a smooth tax season.