Tax day is often associated with negative emotions, but it doesn’t have to be. Whether you’re a wage-earning individual or a business owner, it is possible for you to save money on your return. You may increase the number of deductions you claim. You may potentially decrease your tax bill. All it takes is an effective tax preparation method, to begin with.
Below are ways to prepare your taxes effectively to maximize savings and reduce money-eating penalties.
1. Start preparing early
The earlier, the better. Not only starting early will give you less pressure but it will also give you sufficient time to review your tax status and know the deductions you are eligible for.
Work-related expenses, for example, are tax deductible. Think back in your mind about all job-related costs you paid for, which you might have forgotten about or didn’t even know you had made. Another factor to consider is your current status in the family. If you’re the main income earner in the household and you have many dependents, then you’re entitled to certain deductions other taxpayers aren’t. You’ll have a hard time reflecting on these important things when you’re in a rush.
2. Review your tax status regularly
It is suggested to have your financial information on a regular basis, perhaps quarterly, with a tax professional. When assessing your information, make sure to tackle the following questions:
What purchases should I make and what are the ones could I delay?
Should I make estimated payments to avoid fines and penalties?
Should I consider minimizing taxes using tax deferral strategies, like a retirement plan?
3. Be mindful of the forms and requirements
Next to assessing your status is studying the forms and following directions. This will help ensure you’re not missing anything important, as mistakes can trigger a larger tax bill. Determine the requirements you need to take home a particular deduction or exemption or file an amended return (if there are errors on your previous return). Learn the consequences of not filing your return on time and what you should do about them.
While you can turn to a professional tax preparer to assist with your return, it’s still important to do your homework.
4. Get organized
What’s more stressful than the process of claiming tax deductions? Not having records of expenses and income statements to show because you lost them.
Get all your paperwork in order. Keep statements from all your income sources, as well as receipts and records of work-related expenses. If you’re a business owner or a property investor, classify all documents on assets, like vehicles and equipment, you purchased during the year. In this way. Your preparer can effectively calculate all the depreciation deductions you’re eligible for.
The better you organize your return paperwork, the more rapidly and efficiently your tax preparer can get the work done. Moreover, being organized helps you see what you might have missed.
5. Don’t rush your tax preparer
Never bring the paperwork in on April 5 and then rush your accountant to file your tax return by April 10. Yes, it can be possible but that wouldn’t do you any good. Not only will it put physical and mental pressure on you and your accountant; your preparer may also likely to miss valuable deductions if you don’t give him/her sufficient time to work.
6. Say no to late filing charges
Delays not only waste time but money as well. The penalties for late filing and defaulting on estimated tax payments eat into any money that you may receive from refunds. So save yourself from throwing money to such senseless expenses by getting your calendar ready so you don’t miss tax deadlines.
7. Use a tax preparation software
If your taxes are simple and you have knowledge of tax accounting procedures, then you may want to use a tax preparation software designed to help individuals and corporations prepare for and file tax returns. You could save thousands in payments if you use the right tax program.
Author Bio: Ina Salva Cruz is a resident writer for Depreciator, an Australian-based business specializing in Tax Depreciation Schedules. Being an enthusiast of pursuing financial security herself, she writes and shares self-help articles focused on personal finance, tax planning, and property investing.