Tax filing day is rapidly approaching us on April 18th as countless Americans are scrambling to gather up their paperwork and get their returns in on time. Here are five last minute tips that can reduce what you owe or increase your refund.
- Report all of your income. If you try to hide some of your income that you have received throughout the year, you may end up on the IRS audit list. Any time you receive income, whether it’s payment for a freelance job, a dividend check or interest from your bank, you’re required to report that income and pay taxes on it. In fact, you should receive a 1099 form from each issuer that pays you.
- Know your tax credits. Tax credits work by reducing your tax liability dollar-for-dollar. For example, a $1,000 tax credit means you get to automatically deduct $1,000 from your tax bill in full. As you prepare to file your return, take some time to read up on the various tax credits out there. For example, there are tax credits geared toward parents, students and low earners that can add up to huge savings.
- Don’t estimate your deductions. On the other hand, tax deductions can save you money by excluding a portion of your income from taxes. Some of the deductions that are available to tax filers include: mortgage interest deductions, medical expense deductions and deductions for charitable contributions. However, you need to check your records and make sure your numbers are 100% accurate.
- Contribute to last year’s IRA. If you failed to put money into an IRA last year, here’s some good news: it’s not too late! You can make a contribution that counts for the 2016 tax year. In fact, you have until Tax Day, April 18th, to make a contribution to the previous year’s account.
- File Electronically. Filing electronically can help to eliminate math errors. If your return contains a major mistake, you could get audited or cause your refund to be delayed. In 2014, the IRS identified almost 2.3 million math errors from the previous year’s returns.
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