(WKBN) – Tax season is quickly approaching. Some experts are encouraging people to start preparing now.
There are a few things you can do to make filing quicker and easier.
The most important thing you can do when going to your tax appointment is to remember all of the necessary paperwork.
It’s also important to protect yourself from identity theft this time of year, which can slow down the tax filing process.
“Start looking for your W2s,” Michael Flugher said. “If you’ve ever been a victim of identity theft, you should be receiving a letter shortly or you should have just received it with an identity theft PIN. Not something to worry about if you’ve never reported it, but that is required when you file your taxes.”
According to TurboTax, there are certain things you can do now to maximize your tax refund or minimize the taxes you owe:
– Defer your income: Income is taxed in the year it is received — but why pay tax today if you can pay it tomorrow instead?
– Take some last-minute tax deductions: Just as you may want to defer income into next year, you may want to lower your tax bill by accelerating deductions this year. For example, contributing to charity is a great way to get a deduction. You must have a receipt to back up any contribution, regardless of the amount. Other expenses you can accelerate include an estimated state income tax bill due January 15, a property tax bill due early next year or a doctor’s or hospital bill.
– Beware of the Alternative Minimum Tax: Sometimes accelerating tax deductions can cost you money if you’re already in the AMT or if you inadvertently trigger it. The AMT is figured separately from your regular tax liability and with different rules. You have to pay whichever tax bill is higher. This is a year-end issue because certain expenses that are deductible under the regular rules — and therefore, candidates for accelerated payments — are not deductible under the AMT.
– Sell loser investments to offset gains: A key year-end strategy is called “loss harvesting” — selling investments such as stocks and mutual funds to realize losses. You can then use those losses to offset any taxable gains you have realized during the year. Losses offset gains dollar for dollar.
– Contribute the maximum to retirement accounts: There may be no better investment than tax-deferred retirement accounts. They can grow to a substantial sum because they compound over time, free of taxes.
– Avoid the kiddie tax: Congress created the “kiddie tax” rules to prevent families from shifting the tax bill on investment income from mom and dad’s high tax bracket to junior’s low bracket. So be careful if you plan to give a child stock to sell to pay college expenses.
– Check IRA distributions: You must start making regular minimum distributions from your traditional IRA by the April 1 the following year in which you reach age 70 1/2. Failing to take out enough triggers one of the most draconian of all IRS penalties.
– Watch your flexible spending accounts: The advantage is money that goes into the account avoids both income and Social Security taxes. The catch is the notorious “use it or lose it” rule. You have to decide at the beginning of the year how much to contribute to the plan and if you don’t use it all by the end of the year, you forfeit the excess.
(More information on the top eight year-end tax tips from TurboTax)
The first day you can file your taxes is January 15 and the last day is April 15.