When it comes to tax time, most of us would like to get the filing part over as soon as possible. However, by investing a little more time and effort and possibly seeking the help of a professional, you may be able to get a much higher tax return than initially expected. Consider using a tax company to help you take advantage of all credits you may be eligible for and follow these five tips to help boost your tax refund. Maximize your efforts to get the most money you can or at the very least not owe as much when Tax Day rolls around again.
Tip #1: Change Your Withholding
If you are a full-time employee, your HR department would have had you fill out a W-4 form at the time of hiring. The number of exemptions you claim on this form decides how much is withheld for taxes from your paycheck each pay period. The more exemptions you claim, the less money that is withheld, which means more owed at tax time. You can request to change this exemption and update your form to change your withholding to possibly increase how much you receive as part of your tax refund. Consider if this would be an optimal choice for your monthly budget. Then, discuss with your HR manager when and if this option is available to you.
Tip #2: Consider a Home Business
If you and your family are in a position where a home-based business makes sense, then you can begin to deduct certain business expenses when filed properly with the IRS. Whether you decide to start a freelance business for your services or you have joined a popular home-based business model such as Mary Kay, make sure to keep excellent records of all your accounting. It’s important to keep all receipts that are associated with your business, including office supplies, Internet service, and money for gas. These may all be able to be deducted when tax time rolls around and can potentially bring you thousands of additional dollars in tax savings. By doing your research and speaking with others who have their own home-based businesses, you can learn what works best.
Tip #3: Be a Bigger Contributor
Many people have it on their list of money goals to contribute more to their IRA. By doing so, you may also be boosting your tax refund. By contributing more to your IRA, it lowers the total amount of income that’s taxed. The less owed in taxes equals a bigger refund. Since there are limitations and deadlines when it comes to your IRA, it’s best to speak with a tax professional to explore this option further. He or she will guide you through how much you can afford to contribute where it will make sense for your lifestyle and day-to-day budget.
Tip #4: Deduct Your Donations
If you found yourself to be extra charitable over the year, then you might be eligible for a tax deduction which could decrease the amount owed on your tax return. One key thing to keep in mind is to keep the receipt for every donation you make. Whether you donate clothing to your local Goodwill or used books to your neighborhood library, they most likely will offer you a donation receipt. If not, just ask. Typically, there is a maximum that you can deduct for donations, but if you’ve been wanting to clean out your closets, book shelves and pantries and donate to a good cause, then you could possibly get a higher refund in the process.
Tip #5: Put Together a Tax Plan
Much like anything else having to do with finances, having a plan in place is helpful. At the beginning of the year, mapping out income and expected expenses can help plan where to allocate money for the year ahead that would make sense for deductions. If this sounds a bit too complicated, that’s where a tax professional comes in to play. You can review your financial goals and your tax person can then develop a plan for your year, which you can evaluate every few months. By doing this, you decrease the amount of taxes you’ll owe and celebrate a bigger refund check after your tax filing is complete.
What plan do you put in place when it comes to tax season? What’s your go-to tax tip?