Taxes are an inevitable part of life. No matter what kind of work you do, you have to deal with taxes in one form or another. While you may be focused on figuring out how to best file taxes for your small business, you also need to sort out how to do it for your personal finances. The IRS expected to process as many as 155 million individual taxpayer returns in 2018 alone. With that large of a volume every year, this federal agency has plenty of experience in spotting a correctly filed return and an incorrectly filed one. This makes it important that you file your taxes correctly, especially if you are a business owner. Any discrepancies in your personal taxes can reflect poorly on your business.
By following these tax-filing tips, you can ensure that you do the best job possible for your personal finances as well as those of your business. With these tips, you may even be able to see a bigger return than you thought you would. Let’s dive into these helpful tips so that you can have an easy, profitable tax season.
Consider Your Filing Status
The filing status you choose when completing your tax return will likely have a major impact on the size of your refund. This is especially true if you’re married. About 96% of married couples decide to file jointly every year, but this is not always the best option.
You may have to put in more effort if you choose the Married Filing Separately status, but you may be rewarded for the time and work you put in with major tax savings, under the right conditions. A situation that would benefit from choosing this filing status is if one spouse has a lot of medical expenses. Calculating your taxes separately, then, may allow for a larger deduction. The Child Tax Credit is also available to spouses who file separately. This credit offers $2,000 per child who was under the age of 17 in the year you’re filing for and can be claimed by separate filers who has less than $200,000 in adjusted gross income. In comparison, joint filers must have less than $400,000 in adjusted gross income in order to claim the credit.
However, choosing to file separately can have its drawbacks, including losing certain deductions that are available to joint filers. Spouses who file separately must also make sure to take either the standard deduction or itemize their deductions, the two returns must match in this regard. Before you decide on your filing status, be sure to do some research. Google is responsible for about 90% of searches in the United States and will give you many helpful results. If you still have doubts, it’s best to consult a tax professional about which status you should choose.
Take Advantage of Tax Deductions
There are many different kinds of tax deductions. If you’re not aware of the variety, however, you won’t be able to use them to make a difference in your tax refund. Some of the most commonly overlooked deductions include:
- Out-of-pocket charitable contributions
- Student loan interest
- State sales tax
- Reinvested dividends from mutual funds
- Earned Income Tax Credit (EITC)
- Child and dependent care
- State income tax paid on the pervious year’s return
- Medical miles
- Charity miles
- Certain jury duty fees
To ensure that you can claim any of these deductions when you file your taxes, make sure that you keep good records of them. These records could be receipts, invoices, and statements that confirm payment of some sort. For deductions like charitable contributions and medical or charitable miles that you wouldn’t get a receipt for, be sure to write down the details surrounding the miles you drove or the ways in which you made contributions.
Know Your Available Tax Credits
Just as you should be familiar with potential tax deductions, you should also know what tax credits you can claim. In fact, tax credits can boost your refund even more effectively than tax deductions. That’s because tax credits are a dollar-for-dollar reduction of your taxes. With a $100 credit, you would get $100 off of your taxes.
Americans with children often don’t claim all of the credits they can. Not only can they claim the Child and Dependent Care Credit, but parents with three or more qualifying children get a much higher maximum credit. Parents who are supporting a child in college can also claim certain education credits, as long as the student themselves doesn’t file on their own and claim these credits.
You can also receive tax credits for energy-saving home improvements. Of course, you wouldn’t receive tax credits for standard home maintenance, such as following the recommended guideline of having your roof inspected once or twice a year. However, you could claim the credits if you had solar panels installed on your roof. If you did this kind of improvement in 2019, you could receive a credit of up to 30% of the cost of qualified energy expenditures. The government is also offering a tax credit for purchasing qualifying electric vehicles.
If you’ve been putting off filing your taxes for this year, you can now use these helpful tips to successfully tackle them. Once they’re done, you can breathe a sigh of relief and start preparing for next year’s tax filing season.