It’s hard to believe the 2017 tax season is nearly here, and you’ll be getting the information you need to settle up your 2016 tax return with Uncle Sam. Take advantage of the tax benefits available to you throughout the year.
First, think about getting organized. It’s important to have one place — a large envelope or a file folder — where you can accumulate tax information as it arrives. When it is finally time to fill out the tax return, a lot of information is required and every detail counts in making it a smooth process.
Read on for 10 savvy tips for tax-filing season.
1. Maximize retirement plan contributions
If your employer offers a 401(k) or other type of deferred pension plan, make every effort to contribute the maximum amount allowable — especially if your employer matches your contribution. Otherwise you are leaving money on the table that could benefit you in your retirement. Think of the employer match as an immediate 100 percent return on your money. Even if there is no match, all of the funds are tax-deferred and grow tax-free.
If your employer does not offer a retirement plan, then consider making a contribution to a traditional individual retirement account or a Roth IRA. The former potentially offers a tax deduction for the year the contribution is made, but both offer tax-deferred gains.
2. Adjust your withholding
Check your year-to-date withholding and consider changing the taxes withheld if you are expecting a large refund.
This is especially important if you are claiming the earned income tax credit, or EITC, or the additional child tax credit. Why? The IRS is now required by law to hold all refunds on those returns until Feb. 15. The new law was put into place to allow the agency additional time to detect and prevent tax fraud.
IRS Commissioner John Koskinen said in a statement: “It’s a personal choice if you want to have extra money withheld to get a bigger tax refund, but you have options available if you prefer to have a smaller refund next year and more take-home money now.” You will need to complete Form W-4, Employee’s Withholding Allowance Certificate, to adjust the amount of taxes withheld and submit it to your employer.