While no one really likes doing taxes, its unavoidable every April. And although it can be disheartening to see how much of a paycheck goes to paying taxes, contributing a fair share is part of being a responsible member of society.
It's helpful to plan for tax issues during the entire year, not just as the tax filing deadline approaches. Many tax strategies need to be planned and in place well in advance of April 15.
To make the process as painless as possible, keep good tax records throughout the year. Then, when you receive the Form 1040 packet and your state's tax packet, youll be ready to go. The records you collect during the year, plus certain forms that arrive after the first of the year, will make filing much easier. The Tax Preparation Checklist will help you know what forms and records are typically useful.
In addition, although it may be tempting, avoid withholding too much money from your paycheck. Although such a strategy usually results in a large refund, it really represents an interest-free loan to the government. Instead, you could be using this money all year to help you meet your goals and set aside money into savings.
If you qualify for a refund, resist the temptation to use a service offering rapid refunds. These are usually short-term loans that carry high fees.
Regardless of your financial condition, theres a good chance you qualify for some tax credits or deductions, which can help reduce your tax bill. Also, parents may be eligible for additional tax breaks with the Child Care Tax Credit and Earned Income Tax Credit.
You also can visit an IRS Taxpayer Assistance Center and ask for help in preparing your tax return if you meet certain criteria (currently, you must have less than $33,000 per year of income). To learn more, click here.
Managing Your Money: Paying Your Taxes
Tax Preparation Checklist