Tax season is quickly approaching, so now is the time to start preparing. For most people, filing taxes is easy and goes off without a hitch. For others, especially those who are self-employed, filing taxes can be a source of anxiety and stress.
In addition to the prior year tax cuts, there are a few other things anyone filing their taxes needs to know prior to filing.
As much as everyone wants to reduce paper waste, it’s important to keep accurate records of all transactions. This is particularly important for freelancers and business owners. Keeping accurate records may not lower the tax bill, but it will speed up the process when it comes time to file.
Double Check Withholding Amounts
Under the new Tax Cuts and Job Act, it’s important to double check how much is being withheld from each paycheck. If it’s too much, then a refund will be issued. However, if not enough is being withheld, tax payers may end up owing money to the government. Check out the new withholding tables and make sure the right percentage is being deducted.
Choose a Tax Preparer
Filing taxes doesn’t need to be difficult, however, it does take someone who is familiar with the new rules and regulations. Choose who will prepare your taxes prior to filing. Waiting until the last minute is never a good idea, especially if you have had any major life changes in the last year.
Self-employed individuals and W2 employees need to contribute as much as possible into their retirement accounts. Doing so will lower the amount of taxes owed. In addition, these contributions won’t be taxed until it’s withdrawn. The contribution limits for 2019 is $19,000 if aged 50 or older. For those who can’t afford that amount, they should try to match their employer’s contribution.
Making the most out of deductions is the best way to lower taxes owed and possibly get a refund. Single filers can claim $12,000 in deductions, heads of household can claim $18,350, and married couples filing jointly may claim $24,400. Any taxpayer who doesn’t reach the threshold should opt for the standard deduction.
Filing taxes doesn’t need to cause unnecessary stress. With a little advanced planning, filing taxes and possibly receiving a refund is possible. Be diligent in preparation and make sure all necessary documentation is readily available prior to filing.