Key Tax Return Insights That You Shouldn’t Ignore
After your tax return is filed with the IRS this year, and before you tuck away your copy, take the time to look it over carefully. Your tax return says a lot about your finances. If you know what to look for, your tax return can help you identify areas where you can strengthen your financial situation. Follow the tips below to help in your review:
1. Identify possible deductions and credits for the current tax year.
When you look closely at your tax return, you may see added deductions and credits that you didn’t take advantage of. Consider what you can do in the coming year to qualify for these credits and reduce your tax liability.
2. Reduce your tax liability from tax-advantaged retirement savings.
If your return shows that you set aside very little in your retirement account last year, now is the time to rectify the situation. You could very well be losing out on the tax-sheltering effects of qualified retirement accounts on your income.
3. Get credit for donations. If you make regular charitable donations, but you don’t always maintain records or receipts, make this the year that you do. You may be surprised by what you’ll be able to deduct next year.
4. Check in on your tax withholding. If you are getting a large refund this year, good for you! However, this can also be an indicator that you are withholding too much, which can leave you short on cash throughout the year. On the flip side, if you were penalized for underpayment of taxes due to insufficient withholding, be sure to calculate the proper amount of tax you should be paying and adjust accordingly.
5. Leverage your debt expenses more effectively. Did you know that you can deduct some or all of the interest paid on certain debts, such as student loans and your mortgage? If not, be sure to look into what debt expenses you can deduct for the current tax year. While the value of debt deductions varies, a tax professional can guide you on what they are and which ones you qualify for. Another note here—if you have a tax refund this year, you may want to use all or part to pay off some debt, which is always a smart financial move.
6. Let our tax professionals help. Once your tax return has been fired off to the IRS, you may be tempted to file it and forget it. However, this may cause you to overlook opportunities to mitigate your tax burden in the coming year. Speaking with your tax professional to best plan your tax strategy is a good move. Remember, our team of professionals is here to help!
Sources: New Jersey Society of CPAs and Nerdwallet.com