Many people panic over doing their taxes, and end up procrastinating. Here are some tips to make sure you get them done smoothly and easily.
Start early. For the most part, your W-2 forms will be sent out by January 31, giving you two and a half months to complete your taxes. Make sure any former employers have your current address on file, or change your address with the post office if applicable. Gather any receipts you’ll need for deductions (such as charitable contributions, tuition payments, etc) before your W-2s come so you’ll be ready to go. The earlier you do them, the less likely you’ll be to loose the documents! Speaking of that, make sure you keep everything in a safe place, such as a file folder or lock box, perhaps with other important documents.
Get help. If you make under $54,000, you can have your taxes prepared and electronically filed for free. Check irs.gov to find out how. If you are married, own property, own your own business or have other complicating factors, you might want to hire a tax professional, such as Jackson Hewitt or H&R Block. An appointment usually takes an hour or less. However, depending on how complicated your taxes are, these appointments can cost up to a few hundred dollars, so make sure it’s worth it in terms of the extra amount you’ll get back and how much of your own time you’ll save. Those companies also have online programs that guide you through your own tax preparation Choose that or Turbo Tax if you’d like to save money but get the most deductions.
Expect trial-and-error. If you’ve changed your W-4 in any way this year you might be in for a surprise when it comes to how much you’ll owe or be refunded. If you start a new job in a higher tax bracket, your withholdings will change. The same goes for getting married or adding dependents. If your W-4 withholdings are at the lower, married rate, you might end up owing money. The same goes for the amount of deductions on your W-4. If you owe money this year, lower the number of deductions on your W-4 or have your taxes withheld at the higher single rate. You can ask your employer for a new W-4 form at any time. If all else fails, you can have an extra amount withheld from each paycheck – say, $10 – or just automatically stick that amount in an interest-bearing account, so you’re more able to manage paying taxes next year.
Try to zero out. Everyone loves a refund, but in essence, you’re giving the government an interest-free loan. If you get $1,000 back this year, you might stick it in savings or go on a shopping spree, but if you had gotten that money in your paycheck and put it in a CD with 4% interest, you’d have $40 extra. Up the number of deductions or lessen the amount that’s taken out of your paycheck, and automatically transfer the difference into your savings. That way, you’ll be less tempted to see it as free money! Just make sure you actually DO save it and won’t be tempted to spend a little extra each paycheck on a treat for yourself.
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