No one likes to pay more taxes than necessary; therefore, consider the following 10 tax tips to successfully navigate the upcoming tax season.
1. E-File
E-filing saves trees, time and money, and will help you get your refund quicker.
2. Make Sure Your Filing Status is Correct
To make sure you pay or save the correct amount of money on taxes, and to prevent the dreaded audit, make sure you are using the correct filing status.
3. Know Your Adjusted Gross Income (AGI)
Your Adjusted Gross Income is used to determine which tax credits and deductions you are eligible for and their amounts, therefore, your final taxable income. Fill out Form 1040 to determine your AGI.
4. Know Your Exemptions
There are many exemptions that you can claim which will provide you with a tax discount, such as being married, having children, being a contributing member of a society, etc.
5. Know Your Tax Credits
Unlike exemptions, tax credits are subtracted directly from the taxes owed, reducing the amount you have to pay, dollar for dollar.
6. Itemize Your Deductions
Although it is easier to claim the standard deduction, it is generally better to itemize, especially if you live in a high tax area, own your own home, have high medical expenses, or are self-employed.
7. Don’t Fear an Audit
An audit occurs anytime certain flags (audit triggers) have been triggered on a tax return. If you have not gone out of your way to defraud the IRS, an audit should not be difficult.
8. File an Extension
If you are unable to complete your return by the April 15th deadline, be sure to file Form 4868 to get a six-month extension to prevent costly penalties. Despite the extension, you must still pay what you estimate you owe.
9. Hire an Accountant
In order to take full advantage of all the tax credits and deductions, and to avoid the dreaded audit, sometimes it just makes sense to hire someone who is knowledgeable in the industry. If you lack the time or skills in this area, consider hiring an accountant, especially if you find yourself in the following situations: being self-employed or owning a business, taking complex deductions, going through big life changes like having a baby or buying a house, frequently trading in investments, etc.
10. Don’t Take Advantage of a Rapid Refund
Although you get your money faster, it is considered a loan and a huge interest rate will be deducted from the amount that you receive.
For more information about filing your taxes, contact Phocus Companies serving the Greater Phoenix, Arizona area.
