Filing taxes is a rigorous process, and no one really takes pleasure in going through the process every year. Still, it remains a necessity despite the headaches that come along with it. Getting through those mountains of receipts and compliance clauses is only made a tad bit sweeter by the unexpected refund that usually comes after it. And as much as we’d love to tell you that there was a way to make the process simpler, we can’t. But what we can tell you is that if you do things the right way, you may end up accumulating a lot in terms of tax savings.
Experts stress the fact that most people file taxes, but never stop to consider where their money is actually going. If only you pay a little more attention and keep track of certain expenses like business, medical and charity, etc., you’ll be pleasantly surprised by how much you can save. All it takes is planning appropriately and staying organized. With a few careful steps, the use of efficient digital tools, and a few innovative pieces of advice, you can easily realize that there was immense potential for tax savings right in front of you all this time!
Here are a few ways to make tax filing both cost-effective and easy for you moving forward:
Avoid delays as much as possible
Tax filing requirements continue to change and the IRS is doing everything to make things easier for people needing to deal with these. There are a lot of options currently in effect to not just make the procedure faster, but also to make the payments more manageable. For instance, the IRS Streamlined Installment Agreement options allow businesses that owe up to $25,000 and individuals that owe as much as $50,000 to pay in 24 or 72 months, depending on the case.
That being said, tax filing is still challenging. If the review gets flagged for one reason or another, your refund naturally gets delayed. It is, therefore, better to be proactive than reactive. In order to do this, make sure you get your filing done before the deadline, especially when it is a simple case, like if you have a single W-2 with standard deductions, you can e-file way ahead of time.
When the return of taxes is more complicated, begin gathering your data and seek assistance as soon as possible. The earlier you begin the procedure, the sooner you can hire a knowledgeable tax expert, find any missing documents, and smooth out any irregularities.
Make sure your returns are as accurate as possible
Most people don’t know they can get a copy of their tax transcripts from the IRS’s online portal without any charges. But why would you want to do that? Well, the IRS cross-references every tax filing with the entries they have in their systems. The payment information from government records, the data you provided in the W-2 form from your employer, and 1099s from any investment companies, clients, or banks you work with are all checked by the tax governing body.
In case there is the slightest inaccuracy found in what you filed and what the IRS has on file, they can flag the returns for a manual review. In some instances, this may lead to a comprehensive audit that may not get you into trouble, but it will definitely delay your refund considerably. The only way to avoid this is by reviewing your filing extensively before submitting it. It is also best to get it checked by a second set of eyes, preferably those of a professional. Only submit once you are 100% sure everything is in the right order.
Be aware beforehand if you’ll need an extension
You need to constantly be sure about the deadline for tax filing, and when you know you won’t be able to get everything organized in time, it is better to ask for an extension beforehand. It is not beneficial to miss the deadline and have to pay additional fees when a simple request could give you more time to get things in order.
However, at the same time, there is no reason to delay the amount you owe anyway. You need to be aware of the expected tax payments next year because the IRS expects that you act in good faith to avoid any interest and penalties that may be coming your way for missing the set deadline.
Keep tabs on the changing rules every now and then
Deductions and tax credits can shave a significant amount off your tax bill and even increase the amount of refund if you are eligible for one. The rules in this regard continue to change every year, though. For instance, in 2021, the temporary child tax credit was as much as $3,600 for every kid that was eligible, but in 2022, that amount was reversed to what it was in 2019. Similarly, earned income tax credits were lower in 2022 than they were in 2021.
These are just some of the examples of cases where you need to be careful and save yourself from paying extra in places where you can make considerable savings.
Use technology to your advantage
Today, the world is a different place because of technology, and the field of tax filing is no exception. There are mobile apps and websites that can help you organize your finances, track receipts, record miles, and even do your entire tax calculation for you. Now, you may end up paying a small fee for some of the more reliable digital tools, but at the end of the day, the convenience that comes with it is well worth the extra few dollars spent.
Check if you qualify for free filing
There are various programs out there that can qualify a person for tax filing free of charge. For example, if you make less than $100,000 a year and have a 1040A or 1040EZ, solutions like the TurboTax Absolute Zero or H&R Block More Zero can allow free filing. Also, the IRS itself has a Free File option, but to make the cut for that, you need to be earning less than $66,000 a year.
Filing taxes doesn’t have to be as challenging as it seems and doesn’t need to be so heavy on the pocket. Being smart, proactive, and organized are the simple things that can not only streamline the entire process for you substantially but end up saving considerable amounts for you in the first place.