The tax return for this year has been filed. However, now that you have finished your tax file, what might you have done better? Taxpayers often make the mistake of putting off thinking about their taxes until tax season. Yet, if you plan and make some financial adjustments now, you will be in an improved position to submit your taxes the next year and save time and money.
These are our best tax season preparation tips that you should go by in order to take advantage of your tax savings while paying your taxes over the next year. For more tips, contact the tax preparation services in Slope Park, Brooklyn, NY.
Want To Stay Prepared For The Next Tax Season? Make These Changes!
- Revisit your Form W-4
Are you unhappy with the amount of your tax refund or bill this year? You can easily make sure you are in control of the sum of tax collected from your paychecks by making modifications to your W-4.
You may have noticed that the W-4 form has a slight change in appearance if you started a new job during the last four years. Beginning in 2020, the IRS simplified the W-4 form to increase the accuracy of employee withholding and bring your taxes close to “breaking even.” This means that your post-filing tax bill or refund would be as near to zero dollars as possible.
- Maximize your retirement contributions and additional advantages as an employee.
Any tax-deferred retirement account, such as an employer-sponsored 401(k) or an IRA, should be maxed out. Just be sure not to exceed the contribution caps, as doing so could result in substantial tax penalties. Furthermore, if your company decides to match a portion of your 401(k) payments, make the most of this opportunity!
Taking advantage of the flex spending accounts and health savings accounts (HSA) that many workplaces offer is also an intelligent move. You can save tax-deferred or tax-free money with HSAs and flex plans that you can then use for approved costs like healthcare (or occasionally child care).
- Sell stocks that do not produce profits for you.
Which stocks have been the most significant drain on your investing portfolio? Think about selling them this year and reducing the losses from your taxable income the following year or utilizing the losses to make up any realized gains. We call this tactic “tax-loss harvesting.”
Realized losses are deductible up to $3,000 annually (or $1,500 for married couples filing separately). However, any additional losses you suffer can be carried over into the next tax year if they surpass the yearly cap.