Tax Day Tips

Happy Tax Day! If you’re wondering why we would wish that on April 18, click here. Still, we understand that tax day is simply not the happiest of holidays.

Hopefully, you have already filed and have invested your refund into something worthwhile, such as a home improvement or paying down consumer debt. If not, it is time to do so now. For those not ready to file, it is wise to request an extension instead of paying penalties associated with filing late.

For those unhappy with their tax refund or lack thereof, the time to begin thinking about next year’s return is now. This advice may help enlarge your refund, or at least prevent you from writing Uncle Sam a check on April 15, 2018.  

  • Evaluate. Begin by considering whether getting a huge tax refund is the best choice. Though it sounds wonderful to receive a large sum of money directly from the government, consider that unless you’re getting a great deal in tax credits, the money was yours in the first place. Withholding extra is like loaning the government money at no interest. Ideally, aim to receive the amount withheld as close to the amount owed as possible, then put the “extra” normally withheld into an interest-bearing account. Adjust withholdings to match current needs.
  • Anticipate changes. Consider what will change in the upcoming year, and remember that almost 4 months of the year have passed. For example, if a dependent is turning 17 at any point in this calendar year, their child tax credit will disappear. It may be necessary to put back additional funds to compensate. Also think about raises, which could bump you into the next tax bracket. 
  • Save receipts. Create a file now to hold and organize receipts throughout the year, or choose an electronic filing system and set it up. Save receipts and letters pertaining to any charitable donations. Also, save receipts for necessary work expenses and moving expenses if moving for work. Consult your tax professional about other expenses that may be deductible.
  • Adjust pretax savings. This is a good time to look at places to put a portion of income before taxes are taken out. For example, health savings accounts or flexible spending accounts allow families to use funds for certain expenses without paying taxes on that portion of income. Some college savings or retirement accounts are also worth considering, though one must also consider if more taxes will be taken out at a later date.
  • Evaluate mortgage options. There are many tax benefits to becoming a homeowner. Mortgage interest paid is deductible, as are some taxes and homeowner fees.  For some people, refinancing can lead to additional tax benefits at filing time. Consult a tax professional for details.

If tax day has you down, cheer up with these tax day deals. Happy filing, friends!