The early bird gets the worm applies to many situations in life, and that includes getting the most out of your tax return. Planning ahead may help reduce your future tax liability, boost your retirement savings and allow you to stress less when tax season finally arrives. Here are a few simple ways to get a jump start on your taxes well ahead of the deadline.
Get Organized
Getting organized is one of the easiest ways to get ahead for next year’s tax season. The IRS recommends keeping all your records in a central location. One of the most common reasons people delay filing their taxes is due to a lack of organization. By gathering everything you’ll need throughout the year, the feeling of being overwhelmed is minimized and turns what can be a lengthy process into something much simpler.
Know The Rules
When it comes to major deductions like claiming dependents, it’s crucial to know the rules.
Claiming a dependent on your taxes can make a huge difference on your return. It’s common knowledge that children who live in your home can be claimed as a dependent, but what about other circumstances? Some people may be eligible to claim an adult child, a sibling, cousin, or other relative that lives in the home.
The rules can get complicated, but the IRS has created an interactive tool to help taxpayers understand who they can claim and under what circumstances. Knowing the rules in advance can make a significant difference when it comes time to file.
Adjust Your Withholding
Based on your return the year prior, it’s always wise to consider adjusting your withholding for the next tax season. If your filing produced a huge refund or you ended up owing a large amount of cash, it’s a good idea to figure out what works best for your situation.
While receiving a big refund may seem like an advantage at the time, it’s important to remember your refund was actually a year-long interest-free loan to the government. Consider using that extra money to invest now for a better return in the future.
Contribute To Retirement
Contributing to your 401(k) or IRA throughout the year can come with some added benefits. Not only is it easier to put a little money aside each month, it’s also better for your compound returns. You may also get a tax break by contributing more money to your retirement account.
Do you have more questions about how to get ahead on taxes?
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