The tax season is about to kick off in January. Yes, that is quick! Anybody who hasn’t started preparing for taxes yet, remember that it is always wise to start sooner than later. Nobody wants to be scrambling at the last moment to meet the April filing deadline, after all. More often than not, there are always some questions and problems, so getting an early start allows taxpayers adequate lead time for ensuring timely filing.
There are some things that everybody should remember while preparing for tax filing. Here are 5 points that will help in optimizing the tax planning in NYC, and can even increase the size of the tax refund.
1.Weigh Standard Deductions Over Itemized Deductions
The Tax Cuts and Jobs Act has introduced higher standard deductions limits for taxpayers. Simultaneously, it has eliminated personal exemptions and reduced many key deductions. Tax filers must review their filing to determine every possible deduction they can legitimately claim. After that, compare the estimated tax liability with what will be refunded if the standard deduction has been opted instead of itemized deduction.
2. Provide Dependents’ Social Security Numbers
Whether taxpayers have children or they file as head of household with dependents, they will need Social Security Numbers of all the dependents to claim any applicable tax credits, such as the Child and Dependent Care Credit or the Earned Income Credit. Anyone who is divorced and claiming a child, ensure that their ex-spouse is not claiming the same dependent or their return can be delayed. Everybody planning to claim the Child Care Credit, remember to go through the IRS guidelines to ensure those expenses and the dependents are eligible.
3. Organize the Records and Documents
Being disorganized can cause you to lose out on some significant deductions if you are scrambling to find proof and receipt of expenses while filing taxes. Organizing and maintaining all the records and documents properly can be incredibly effective, as in case your return is selected by IRS for an audit, you will have all the documents necessary to verify deductible expenses.
4. Contribute to Retirement Account
You may be filing for the taxes incurred in 2018, but that doesn’t mean you have reached the deadline for contributing to the retirement accounts. You have time until April 15 to open and fund a Traditional or Roth IRA Account. Although remember that with a traditional IRA, your contributions will be 100% tax-exempted; however, in a Roth IRA, you will not get any such exemption, but you will get the benefit of tax-free withdrawals in retirement.
5. Lower the Taxable Income
Taking above-the-line tax deductions is yet another means to reduce taxable income and save money at tax filing. However, the Tax Cuts and Jobs Acts has changed some of the applicable deductions, tax filers can still claim deductions for things like interest paid on the student loan, and contributions to qualified accounts, including HSA (Health Saving Account).
Have you started preparing for your taxes yet? Remember, if you have queries or need assistance, it is always good to consult qualified tax professionals. With their expertise, the difficult process of tax planning in NYC can become a cakewalk.