Tax season is upon us, and while this might not be the most wonderful time of the year, taxes are a necessary evil that we must contend with. If you are like one-third of Americans, you wait until the last minute to file your taxes. Unfortunately, procrastinating won’t do anything except increase your blood pressure, so don’t wait until mid-April to get organized. If you want to avoid the headaches that coincide with filing your taxes, follow these three tips to help you prepare for tax season:
1. Take Advantage of Deductions and Credits
Benjamin Franklin may have declared that “nothing is certain except death and taxes,” but that doesn’t mean you can’t do your best to minimize your tax bill. Fortunately, there are multiple credits and deductions that will not only benefit you this tax season but also give your financial future a boost.
Maximizing your retirement savings is an optimal way to also save on your taxes. If your employer offers a 401(k), you can contribute up to $18,000 in 2017. If you are over 50, you can also take advantage of catch-up contributions of an additional $6,000. If you don’t have the opportunity to save through an employer-sponsored plan, you can still invest in an IRA. IRA contribution limits for 2017 are $5,500 per person, with an additional $1,000 for those over 50.
Contributions to HSAs (health savings accounts) are also an excellent vehicle for reducing your total taxable income. The 2017 contribution limits for HSAs are $3,400 for an individual or $6,750 for a family. You can also make a $1,000 catch-up contribution if you are over 55. For the 2016 tax year, you have until April 18th to contribute to HSAs and retirement funds to benefit from this deduction.
Some additional deductions that may apply to you are state sales tax on major purchases, student loan interest, medical and dental expenses, and business write-offs.
Filing taxes can be painful, but if you know where to look, you may be able to take advantage of a variety of credits. Many Americans qualify for the Earned Income Tax Credit, and if you or your children attend post-secondary education, you could benefit from the American Opportunity Credit and the Lifetime Learning Credit. There are also credits for saving for retirement and child and dependent care. A qualified CPA will know what questions to ask and what to look for so you don’t miss out on any opportunities to reduce your tax bill.
2. Organize Your Paperwork
This is a crucial step to ensure a smooth filing experience. Gather records and account for all income, most commonly in the form of a W-2 or a 1099. Your employer is responsible for getting these documents to you by January 31st, so you will have plenty of time to organize your documents before the filing deadline. In addition, here are some additional documents you may need to file your taxes this year:
Records of charitable contributions over $250
Information from prior years’ tax returns
Mortgage interest and property taxes paid
3. Work With a CPA
Did you know that over one million accountants are hired each year in America to help with taxes? There’s a reason for that. Working with a qualified and experienced accountant can make your tax season experience as seamless and stress-free as possible. They have the knowledge to help you claim all the deductions you deserve, account for many variables unique to your situation, and answer any and all questions you may have. Their expertise doesn’t just save you money, it gives you peace of mind.
Additionally, a CPA will offer suggestions that will help you reduce your taxes for years to come, such as providing advice on tax-friendly ways to set up your estate and showing you the benefits of maximizing your retirement savings. Many CPAs will also work with other members of your financial support team, collaborating with your advisor or attorney to cover every aspect of your finances. Regardless of what your financial situation looks like, you can’t put a price on the value a CPA provides.
Tax day is looming nearer, but don’t let that stress you out. Between now and April 18th, take these steps to get ready for tax season so you aren’t scrambling at the last minute. At Key Wealth Partners, we strive to help you preserve what is yours. If you have any questions about how to prepare for tax time or would like information on how to find the best CPA for your situation, please don’t hesitate to contact me today at (717) 283-4186 or by email at email@example.com.
David Niggel, CFP®, ChFC®, AIF® is the founder and president of Key Wealth Partners, LLC, an independent wealth management firm serving individuals, families, and business owners. Along with over a decade of financial services experience, he has advanced knowledge and training in providing holistic financial planning with fiduciary and ethical care, holding the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Accredited Investment Fiduciary® certifications. With hands-on entrepreneurial experience, he has the unique ability to help clients meet both their individual and business goals. Based in Lancaster, he serves clients through the York, Harrisburg, Hershey, and Central, Pennsylvania areas. Learn more by visiting www.keywealthpartners.com or connecting with David on LinkedIn.