Whether you had a good year or a not-so-good year, from a tax perspective, the beginning of a new year is the best time to reflect on your previous year and make smart, attainable tax moves so you are better prepared when it comes time to file your taxes.
Here are 10 easy tax savings strategies to help you save money in the new year.
File your taxes early. Gather your documents in one place early, and go online to file your taxes. The IRS will begin accepting e-filed tax returns on Jan. 19. The earlier you file, the earlier you will receive your tax refund. Last year, about 75 percent of taxpayers received a tax refund near $3,000.
Don’t overpay to get your taxes done. The IRS predicts about 4 out of 5 taxpayers will prepare their own taxes using tax software this year. The rest will likely pay too much for professional tax help when they can do their taxes themselves and save hundreds of dollars. In some cases, you may be able to file your federal and state taxes absolutely free.
E-file with direct deposit. When you go online, you can e-file with direct deposit, which is the fastest way to get your federal tax refund. The IRS states that most taxpayers who e-file with direct deposit will receive their federal tax refund within 21 days or less.
Remember what you did in 2015. Big life events such as getting married or having a baby are easy to remember, but our lives are busy and some little expenses that can add up to bigger deductions may be forgotten. Don’t forget to have receipts in hand for expenses related to your job search, day camp for the kids, charitable donations and medical expenses, to name a few, when you sit down to file your taxes. These expenses may help you get a bigger tax refund.
Organize your tax documents. Gather your documents, forms and receipts for tax-deductible expenses in one place throughout the year so you don’t forget anything. Keep a folder next to where you place mail. That way, when W-2s, 1099s and other relevant forms roll in, you can keep them together in an accessible spot so you’re ready to go when you sit down to file your taxes.
Maximize your retirement account. If you have an employer provided retirement account, now is a good time to think about maximizing your contributions in the new year. For 2016, you can contribute up to $18,000 ($6,000 if you are age 50 and over) in 401(k) and 403(b) plans. Even if you can’t max out your retirement account, you may want to increase the amount you are contributing. You would be surprised how easy it is to get used to an increased salary deferral coming out of your paycheck when it’s building your nest egg and helping your tax situation.
Maximize your IRA. If you have an IRA account or are contemplating opening one, you can contribute up to $5,500 ($6,500 if you are 50 and over) to your IRA until the tax deadline — which is April 18 this year — and still reap the benefit of a deduction on your 2015 taxes. You may also be eligible for the saver’s credit up to $1,000 ($2,000 for a married couple).
Make estimated tax payments. Did you dive into the world of self-employment last year? Sure, working from the comfort of your home in your pajamas can be a luxury, but you may be subject to estimated taxes. Generally, the self-employed or anyone who expects to owe $1,000 or more is expected to pay quarterly estimated tax payments. The good news is you have until Jan. 15 to make your estimated tax payment for the fourth quarter of tax year 2015 and have it apply to your 2015 taxes.
Lower your taxable income. Taking above-the-line tax deductions — such as moving expenses for a job, the tuition and fees deduction and the educator expense deduction — can all reduce your taxable income and save you money at tax time. Also, if you purchased health insurance in the health insurance marketplace and received a premium tax credit, you may get an even bigger premium tax credit when you file your taxes if your taxable income is lower than expected.
Check your W-4. With the new year, you may have a new job, new marital status or family member. If you are expecting changes in income or the number of people in your family in 2016, you should double check and change the amount of withholding from your paycheck so you don’t have too much or too little withheld.
Using these smart tax savings strategies will help you get off to a good start and may help you save more money in the new year.
More from U.S. News
16 Legal Secrets to Reducing Your Taxes
9 Red Flags That Could Trigger a Tax Audit
7 Most-Missed Tax Deductions and Credits
10 Tax Savings Strategies for 2016 originally appeared on usnews.com
