Many taxpayers cannot wait for the tax filing seasons to end. Once you hit the Submit button or put your return in the mail box, you are ready to enjoy the rest of the year, knowing that you have filed your taxes successfully.
While you are entitled to every bit of relief that you feel after tax season, you should not delay in preparing to file your returns next year. You can start your prep work now by following a few simple and fast tips.
Rethink Your Withholding Rate
Did you end up owing the IRS money this year? If so, you might want to reexamine how much money you have taken out of your paycheck for taxes.
If your withholding rate is too low, you could end up owing the IRS quite a bit of money at the end of tax season. If your tax bill is taking a hit to your household's bottom line this year, you might increase the amount that you have withheld for federal taxes. In fact, you may find that the IRS owes you a refund next year.
Reconsider Your Investments
You can also lower your tax bill next year by investing more money in tax-favored accounts this year. The IRS may allow you to claim exemptions for money that you put into funds like:
- an employer-sponsored 401K
- a Roth retirement account
- a 529 college savings account
- a health savings account
Check Out Exemptions and Credits that You Can ClaimAlong with having the money that you have for medical expenses, retirement, and your kids' college funds being exempt when you file taxes, you also may lower the amount that you owe by claiming other exemptions and credits as well. For example, you may be able to claim the interest that you pay on your mortgage or student loan payments.
You also might include money that you pay to work from home or to run a business. These expenses can include:
- home office costs like utilities or a new laptop
- business-related travel
- office supplies
- entertainment or food related to meeting with clients
- gasoline and car repairs or maintenance that pertain to running your business
If you plan to claim these new exemptions, you should be ready to provide proof of them when you file your return. You should save receipts for all of these costs in case the IRS asks for verification of the expenses next year.
Set Up a Payment Arrangement with the IRS
As you explore new ways to save money on your tax bill next year, you still must deal with the amount that you owe now. If you cannot pay the IRS everything that you owe the government this year, you can set up a payment arrangement by going to IRS.gov.
The installment agreement lets you make payment each month on your IRS debt. The payments are based on your household's current income and designed to be affordable and avoid causing financial hardship to you and your family.
Save Your Tax Records
Finally, you should hang onto your tax records and returns from this year for at least a year if not longer before filing them away. The IRS may audit you in the next three years.
You also will need to refer to your records if you set up a payment arrangement and plan to make monthly installments on your debt. You can keep track of how much you have paid off by referring to the balance on this year's returns.
You may be happy to see the end of this year's tax season. However, next year's season is just around the corner. You can start preparing for filing and paying your taxes next year by utilizing these straightforward suggestions today.