Did you know that the things you do today can affect how much money you get back on your tax refund? One of our core values is to provide tax planning and education so that our customers understand how their daily lives impact their tax returns. With a little research and some forethought, you can arm yourself with a strategy that can help you win next season. Below are eight opportunities to impact your return today.
- Adjust Your Withholding – Your Form W-4 communicates to your employer how much your payroll department needs to withhold from your paycheck to pay federal income taxes. The fewer allowances you claim, the more your employer will withhold from your paycheck. This means the smaller the number, the smaller your paycheck. Ideally, you want your number of allowances to closely match your situation. Factors that affect your allowances include:
- Your spouse (and his or her employment situation, if applicable)
- Your children or other dependents
- Expenses for your children and other dependents
- Your filing status
- Review Your Return from Last Year for Missed Opportunities – Take a printed copy of your tax return from last year into a local Liberty Tax Service office. During your appointment, you’ll receive personalized tax service for your tax situation. Your tax professional will ask you questions about your life and your activities to see if you missed any credits or deductions that you were eligible for.
- Charitable Deductions – As the weather gets warmer, you may find the time and the motivation to clear out any unwanted items from your closet, storage unit, attic, or basement. Donating them to a qualifying charitable organization (online trading posts or donation websites do not count). To find out if an organization that you want to donate to qualifies, please visit the Exempt Organizations Select Check tool published by the IRS.
- Move for that New Job – Considering a change of scenery to take that job in another state? If you’re on the fence about whether or not you can afford to move, it may help you to know that certain moving expenses can be tax-deductible. You may be able to deduct your moving expenses. Updated rules and regulations for taking a moving expenses deduction can be found in our previous blog post about moving expenses.
- Business Expenses – Business owners, sole proprietors, and self-employed individuals enjoy additional tax breaks. For more on these tax breaks, visit our Tax Guide for Freelancers. If you want to capitalize on these deductions, but don’t yet have a business, consider owning a tax franchise or starting your own direct sales business.
- IRA Contributions – Contributing to a retirement account can qualify you for The Saver’s Tax Credit. This credit can help offset the first $2,000 of voluntary investments to an IRA, 401(k) or other workplace retirement program.
- Have a Strategy for Withdrawing Your Retirement Distributions – Depending on the type of retirement account or plan that you have, there are regulations on what age you can begin your withdrawals and the amount that you can (or—in the case of some employer-sponsored 401(k) plans—must) withdraw in a given year. Plans vary and the tax rules are unique. Consult a tax advisor or a Specialist in retirement planning to determine how much you need to withdraw for your needs over a given period of time.
- Go Back to School – Your education is the best investment you can make in yourself. As an added bonus, there are tax incentives that you can enjoy for going back to school. In fact, for some individuals, your 1098-T can make the difference between a tax refund and owing the government taxes. You can qualify for the American Opportunity Tax Credit, the Lifetime Learning Credit, or to deduct Student Loan Interest from your tax return.
Want to gain the tax planning advantage come tax time? Equip yourself with tax knowledge by following eSmart Tax all year long on The Daily Deduction, Facebook, and via Twitter.