An unexpected tax bill can be jarring and disturbing. To help avoid such an unpleasant surprise, Reconcile has a dozen tips to cut your tax bill, and save your money and time:
Even if your financial situation is simple and straightforward, it pays to make sure you’re up-to-date and doing all you can to reduce your tax bill. Using your previous year’s tax return as a starting point to determine your previous income, deductions and credits reported.
If you expect to owe taxes when you file your tax return, it is a good idea to pay as much as possible before the due date, April 15. Failing to do so will result in penalties, further burdening your tax liability.
By contributing to an IRA, you directly reduce your taxable income and save for your retirement at the same time.
The money you put in an HSA has triple tax advantages: The contributions go in pretax, you can withdraw it tax-free for qualified medical expenses and any money you don’t use can be invested and the gains are tax-deferred.
For 2021, you can funnel up to $19,500 per year into an account, thus cutting your income tax bill substantially
Charitable contributions are deductible, and they don’t even have to be in cash. If you’ve donated clothes, food, old sporting gear or household items, for example, those things can lower your income tax bill if they went to a bona fide charity, and you got a receipt.
Tax credits are valuable as they work on a dollar-for-dollar basis. Subsidize your qualifying child care or adult care with your tax bill.
Dig out these deductions. Annual inflation adjustments brought a modest rise in standard deductions for 2021, making the most of it.
It’s free and causes no harm. Knowing how much of your tax is withheld helps. If it’s more, you will get a refund, and less means you will have to pay up.
You might need a CPA or a tax professional to file your taxes depending on your situation. Waiting until April would simply cost you more.
Setting up an account with the IRS will aid in viewing all your tax documents and make payments online, without having to phone or e-mail the agency.
Even though the federal tax reform law eliminated miscellaneous deductions, many states still allow them. Or they may have a lower threshold for claiming them.
There are many tax preparation software and services that can help you with doing your taxes. If you use the right tax filing tools and software, you won't have any trouble staying up-to-date with your taxes.
While filing your taxes can be stressful, it doesn't have to be. With the right knowledge, resources and tools get well organized, save time, and get through it stress-free like a pro.