With summer in full swing, thoughts of flamboyant sunsets, beach days, theme parks, barbecues and weekend getaways are the perfect distraction focused from the everyday mundane matters like taxes and as the next return is not due until April 2020, you may not have the desire to deal with it anytime soon.
However, more than half of the year has been through and it’s high time you started preparation for the next tax season. Filing your tax return may be done once a year, but taxes affect you year-round as the progress made during the year will decide the fate of your tax return bill.
Here are the few tips to make your next tax season easier:
Determine your next year’s taxes
Begin with the tax strategy now for the next year’s return by estimating your income tax and refund using the year 2020 tax calculator to avoid any last-minute chaos. Most of the tax codes changed with the stemming of Tax Cuts and Jobs Act, this may leaveyou puzzled and bewildered as to how it will affect your taxes.
As uncertainty is still persistent about the tax reforms, the best thing to do is start making changes to your tax strategy so it iseasier calculate and file your tax return next year.
Adjust your tax withholding
The government takes a cut from each paycheck if you work for an employer, the amount of which depends on your earnings and the tax allowances claimed by you. The More the allowances claimed by you, the less the government will take from each paycheck. However, you don’t want to claim more allowances than you should as you can end upowing taxes at the end of the year.
The IRS adjusted the withholding tables following the tax reforms which determinethe amount to set aside for taxes from each paycheck. So, be sure to check and update your W-4 forms for withholdings to avoid surprise bills at the year-end.
Track your deductions
Keep a folder with receipts, bills, invoices and all the paperwork related to the tax deductions in one centralized location so you can easily access them when you file the return. Design a system to pull your paperwork early and in an orderly manner to make your life easier coming season.
Possible deductions may include office expenses, business travel expenses, other business costs for self-employed or business owners. There are other deductions as well that anyone can qualify for such as medical expenses, donation bills, charitable contributions, and other local taxes.
Plan your retirement
As you get more comfortable with your finances, you should start looking for ways the improve your financial system which includes refining your retirement plans. It’s a good idea to look at your retirement account contribution whether you have a 401(k) through your employer or any other equivalent retirement plan.
You can make contributions to the traditional retirement account free of tax while withdrawing from Roth accounts tax free in retirement. Besides tax benefits, funding retirement account makes it easier to reach your retirement goals.
Keep yourself updated with the latest tax changes
The government amends tax laws a little every year to improve the taxation system. Often the tax brackets are changed slightly and so do the value and qualifying criteria for some of the tax credits and deductions. Therefore, it is good to familiarize yourself with the key changes that can affect your taxes in the coming year.
Though it is not necessary to know each and every single change that has been made, you can figure out the basic amount of coming year’s tax with the use of the 2020 tax calculator and other website tools and guides, to get started with your taxes.
Undeniably, taxes can never be delightful but with a little forethought, you can make them painless and a bit more facile. Hence, by keeping the above in mind you can always avoid any unpleasant surprises while filing your next tax return in the year 2020. With your tax return planned, you can really relax and enjoy the summer knowing that you have sufficient with holdings to pay your 2020 income tax return.