April 15th is fast approaching, and tax season is in full swing. As you gather receipts and W-2s to file your annual tax return, there are several steps you can take to make the process smoother and maximize your tax outcome. With some strategic planning and organization, you can uncover tax deductions and credits to lower your tax burden or even secure a larger refund. Follow these tax season tips to transform your tax return into an opportunity.
Gather Documents and Receipts for Potential Deductions
To maximize your tax deductions and credits this season, be sure to gather all relevant documents and receipts.
Any unreimbursed business expenses incurred over the past year may be tax deductible. Track down receipts for things like:
- Travel for work (up to 50% of meal costs)
- Continuing education or skills training
- Business assets or equipment
- Home office expenses (if you meet the requirements)
Don’t forget interest paid on student loans or mortgages, as well as any charitable donations made. Obtain official records of contributions for deductions over $250.
Look into tax credits you may be eligible for, e.g. child care credits, education credits, etc. Get the necessary paperwork from childcare providers, schools, etc. to claim these credits. The more you can document, the better.
Double-check that you have proper records for any income as well, such as interest earned or freelance work done over the year. Report all income to avoid potential penalties.
Compile digital or physical folders for each category of deductions and credits to make it easy to find what you need. Be meticulous and keep copies of everything. Come tax time, you’ll be set to get the maximum refund possible. With the right records and receipts, you can transform your return from average to exceptional.
Look Into Tax Credits to Lower Your Bill
As tax season approaches, now is the time to explore tax credits that can lower your bill. Tax credits directly reduce the amount of tax you owe, dollar for dollar. Unlike deductions, which lower your taxable income, credits lower your tax liability.
Look into the Child Tax Credit
If you have dependent children under 17, you may be eligible for the Child Tax Credit. For 2020, this credit is worth up to $2,000 per qualifying child. The credit is reduced or eliminated for higher-income taxpayers.
Consider the Earned Income Tax Credit
The Earned Income Tax Credit (EITC) benefits low- to moderate-income workers. The amount of the credit depends on your income and the number of children. For 2020, the maximum EITC is $6,660 for taxpayers with three or more qualifying children.
Don’t Miss the American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) allows you to claim a credit of up to $2,500 per year for higher education tuition and related expenses for yourself, your spouse, or your dependents. The AOTC is available for the first four years of postsecondary education. You must pay tuition and related expenses for an eligible student enrolled at least half-time in a program leading to a degree or other recognized education credential.
Exploring available tax credits and taking advantage of those you’re eligible for can help lower your tax bill. Be sure to claim all tax credits you’re entitled to when you file your return. The savings can really add up!
Use a Tax Preparer for a Strategic Approach During Tax Season
Using a tax preparer to help you navigate tax season can be a strategic approach to maximizing your tax outcomes.
A tax professional has the expertise and experience to help you take advantage of all eligible deductions and credits. They stay up-to-date with the complex tax code and can determine which tax forms apply to your unique financial situation. With the assistance of a tax preparer, you are more likely to receive the maximum refund you are entitled to under the law.
Filing your taxes with the help of a tax professional also gives you peace of mind that your returns are accurate and compliant. Tax preparers can help avoid errors that lead to processing delays, audits, or penalties. They understand the rules around income reporting, business expenses, rental property, investments, and more.
Using a tax preparer does not mean you give up control or input in the process. You should still gather and organize your tax documents, including W-2, 1099, and 1098 forms. Be prepared to discuss life events from the tax year, income, deductions, and credits you want to claim. Your tax preparer relies on the information you provide to prepare an accurate tax return.
While tax software and do-it-yourself options may work for simple returns, a tax professional is worth the investment for maximizing your outcome during tax season. Their knowledge and skills can translate into sizable refunds, ensure proper compliance, and give you confidence your taxes are in good hands. For a strategic approach to your tax return, consider consulting a tax professional.
So while tax season may not be the most exciting time of year, following these tips can help transform what is typically viewed as an arduous process into an opportunity. Do your research, get organized, and take advantage of all the deductions and credits you’re entitled to. With some strategic planning, you can maximize your tax refund and in turn use that money to pay off debt, save for important life goals, or simply gain peace of mind knowing your taxes were filed accurately. The time you invest now will pay off in the long run. Make this the year you change how you view tax season and come out the other side wondering why you didn’t implement these strategies sooner. The power to optimize your tax return is in your hands.
If you’re looking to file your taxes correctly, seek help from a reputable accounting firm to ensure you’re getting sound advice. One of the most trusted accountants in Miami that you can turn to is Greenlight Financial. Call 305- 860-5970 to get unique and tailored financial strategies to help put your debt away, helping you make the right choices to achieve your goals and financial success.