Let’s just start out by being completely honest with each other, shall we? We all hate, hate tax season! Either we completely despise it or we run around in circles with our hands flailing about just thinking about it. I hated filing my returns too. I procrastinated until the last minute on the dreaded date – April 15th. I felt like there was ticking time bomb, ready to explode somewhere, but let me just wait till 10 seconds on the clock and do something trivial while time flies by. Have you ever felt the same thing? Don’t worry though, tax season does that to you.
I know procrastination can seem like the best idea in the world, but here’s some friendly advice: don’t do it. Just don’t. When it comes to filing your returns, planning in advance really helps. It may even help you reduce your income tax liabilities, because you’re thinking about it more thoroughly than you would if you were filing at the last minute. So, no more last minute fretting. Follow these tips and you’ll do just fine.
1) Do a test run.
It’s important that you have a fair idea of what your income has been like throughout the financial year. This will help you understand exactly how much you owe the government in terms of taxes. Sit down and think about everything you’ve done or purchased that might qualify for a tax deduction. Preparation is key – you probably don’t want to wind up fainting at the end of the financial year while filing your returns.
2) Get that health insurance.
Think about getting that health insurance that you were planning on enrolling in 1975. No seriously, I’m not joking. Get cracking on it. You will get several tax benefits if you do that. For instance, ObamaCare, which is the government’s way of making health insurance available to all, has a certain income bracket which receives tax benefits. Even if you don’t fit into that income bracket, you’ll still get a good deal on your insurance – at least better than you would otherwise.
3) Charity is the way to go.
Being charitable is not just about being a good human being – the added benefit is that you save on taxes! Charitable donations reduce your taxable income which spells into reduced tax liabilities. So choose the charity of your choice and donate. Apart from saving you from paying a hefty amount of taxes, it’ll also make you feel great about yourself and help out a cause you feel the most passionately about. Donor-advised funds are typically the best way to go. So, what are you waiting for?
4) Gift giving is awesome (for you)
You, the tax payer, can gift up to $14,000 annually tax-free. Although the catch is that recipients must have taxable brokerage accounts to receive the assets. A good gifting idea would be for parents to deposit a tax-free gift of up to $5,500 into an individual retirement account (IRA) for their kid. Tax deductions are really easy and hey, they make your kids happy too! You can read more about this idea here.
5) Sell those losing investments.
It’s tax season and now is not the time to be sentimental about your investments. As the financial year passes, some of the bonds you invested in may have declined in value. If that’s the case, then you might want to think about selling them off so that you are able to offset stock gains with bond losses. It will also inevitably help lower the net investment income tax.
6) Don’t be embarrassed – get a tax consultant!
If you need professional help working on your taxes, speak to a consultant before the year ends. It’s even easier to do online today with the help of websites like 1800Accountant, 212tax, and Horne CPA Group.
We could all use some respite from the dreadful frame of mind that tax season drives us to so keep these pointers in mind when you start filing your taxes. Good luck!
Jordan is a 28 year old entrepreneur and a former Business Developer. With an insatiable appetite for the good life, keeps himself current on topics related to technology, gaming and his first love, food. He shares his views in his blog posts hoping to provide valuable information to entrepreneurs like himself who wish to establish a successful business.