Tax season can be a stressful time of year. However, if you play your cards right, it could be a time for celebration. There are many steps you can take to get the most out of your tax return, from withholding more money on each one of your paychecks to deducting charitable donations. Regardless of your income level, there are always ways to increase your tax refund.
1. Take advantage of professional expenses
You may occasionally need to pay out of your own pocket for certain things that are work-related. For example, maybe you subscribe to a magazine that helps advance your skill set. This would be considered a work-related expense that can be deducted from your taxes. Other professional expenses could include a portion of your phone bill if you are making work-related calls, transportation expenses when attending work-related events, and office supply and/or computer purchases that you need to make in order to do your job. If you want to deduct professional expenses from your taxes, make sure to keep track of all receipts.
2. Withhold higher amounts from your paycheck
By changing the number of exemptions that you claim on your W-4 tax form, you can withhold more money from each one of your paychecks. While this means that each paycheck will be smaller, it also means that there is less of a chance that you will have to pay taxes in April. In fact, by withholding higher amounts from each paycheck, you are likely to see a refund when April 15th rolls around.
3. Deduct charitable donations
Any donation you make to a legitimate non-profit organization is eligible for a deduction. A legitimate non-profit organization is one that has official 501(c)(3) tax status. Most non-profits will disclose this information on their website or in other promotional materials. Remember to always ask for a receipt when making a donation to a non-profit organization.
4. Put more money into your retirement fund
Many accountants recommend increasing your contributions to your retirement fund as a way to reduce your tax burden. This is sound advice. You get to keep the money (you just can’t spend it right away), and you have a smaller tax bill, or in some cases, a refund. The best way to do this is by opening and funding an Individual Retirement Account (IRA). To do so, you can consult a tax professional or an accountant, who can advise you on contribution amounts and different deadlines.
5. Start a side business at home
While many people worry that self-employment can lead to a more complicated tax filing process, starting a small side business at home can greatly increase opportunities for deductions. In this case, phone, computer, and other home office expenses, are all deductible. A side business at home allows you to increase your overall income while lowering your tax bill.
There are many more ways to get the most out of your tax return, but it’s important to note that you should take precautions when trying to maximize your refund. It’s always a good idea to consult a tax professional in order to review all of your options. Also, remember to document all relevant expenses and store your receipts. While you may not need them for the tax return itself, you will need to present them if you are ever audited.
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