Have you filed your taxes yet? If not, you could have used item No. 1 on this list. Here are some-last minute tips to guide you through the rest of this tax season, and into the future.
You don’t need to be a tax professional to do your taxes like one: Be logical, be thorough, be efficient, be honest — and listen to our seven tax tips for individuals — and your tax season will be about as hassle-free as tax season can be.
1. File early
While owning a building seems like something every successful business should do, that’s not always the case. For many companies, it makes more sense to continue leasing space, freeing up time and capital that can be better utilized in other ways.
There’s more to this than simply feeling good about getting it done, or getting your refund sooner. The earlier you file, the less chance you give identity thieves to file a fraudulent return in your name. The IRS blocked $24.2 billion in fraudulent returns in 2013. This isn’t a small problem.
Filing early also gives you time to plan if you end up owing the IRS money. That payment is due April 15, no matter when you file. It’s better to file in February and have two months of pay with which to work than to financially cornered if you waited too long.
2. Be smart with your refund
So you filed early and got a nice chunk of change. What do you do with it? There are two ways to look at it. The first, and less responsible, is that you could make whatever luxury or vanity purchase you want without your overall finances taking a hit. If you’re in a stable enough place to do that, good for you.
If you have debt, though, that should be the first and only place your refund goes. It could be an extra mortgage payment. It could knock out a student loan, be a bulk payment on your car or wipe away your credit-card debt. Even if you don’t have debt to put your refund toward, it’d be a great contribution to your retirement fund.
3. Use tax season to de-clutter your life
Look around you. If you’re at home, or even at the office, chances are that you’re surrounded by frivolous, extraneous possessions. What may have seemed like a good or fun purchase at the time might have just been wasteful.
Getting rid of things you don’t need can be a personally refreshing experience. It makes you prioritize your possessions and opens up space in your home or office, and hopefully they end up in the hands of people who need them. If you donate your stuff to charity, it’s also tax-deductible.
There are a few stipulations. You have to donate to a certified 501(c)(3) nonprofit. You can deduct the fair market value of your donation.
Of course, any donations you wanted deducted this year had to have been made in 2016, but you can still get a head start on your 2018 tax refund by donating possessions this year.
You must donate at least 2 percent of your adjusted gross income if you want to itemize your deductions, and you can deduct up to 50 percent of your AGI. If you donated more than 50 percent of your AGI, the excess deductions can be applied to future refunds for the next five years.
4. Don’t let fear of audits keep you from deducting everything you should
There are a number of obscure deductions that people either don’t know about or rarely use out of fear of getting pinched by the IRS. That shouldn’t stop you from claiming deductions that you’ve earned.
There’s the student-loan deduction and the tuition deduction for college students. Medical expenses such as birth-control pills, breast pumps, eyeglasses and contacts, weight-loss programs and preventative dental care are deductible, too, as long as they’re more than 10 percent of your AGI (7.5 percent if you or your spouse is 65 years or older).
So are many common military expenses, such as uniform maintenance, service-related education and dues to military societies or associations you may have joined.
If you had any expenses as part of a job search — such as joining a hiring website or travelling and lodging for an interview — you can deduct those, too.
5. Make sure you’re eligible for what you’re claiming.
One common mistake people make is assuming that they can claim a deduction one year because they qualified for it in the past. Don’t guess. A lot can change in a year, including your personal financial situation and the tax rules.
As much as you want to maximize your deductions, you must take the time ensure that you earned it.
6. File electronically and use direct deposit
It’s 2017, people. If you aren’t filing electronically, you’re delaying your return and subjecting yourself to interminable post office lines. There’s no reason not to do it.
Direct deposit is the easiest way to get your refund, because, well, it’s direct deposit. No waiting for a check in the mail, then having to put it in the bank. We discussed in No. 1 why it’s so important to get your refund as soon as possible. Doing both of these will ensure that happens.
7. Put more money into your IRA
Your personal IRA contributions come “off the top” of your income — that is, they come out before taxes are applied. There’s no reason not to put more money into your retirement account if you can afford it.
It increases your nest egg, that money starts earning interest, and it reduces your taxable income.