No taxpayer wants more tax liability. As a matter of fact, taxpayers would much rather receive a tax return that could stuff their pockets with more money than the tax return from the previous years. With a little bit of tax planning and forethought, financial abundance is coming sooner than you thought.
The IRS Fresh Start Initiative has tax professionals who can aid you in deciding which tax credits can potentially get you the biggest refund.
Filing Status, Is Yours Updated?
Many Americans are looking for ways to optimize their tax returns but don’t necessarily know where to start or how to go about it — One of the first decisions you make when filling out your tax return is figuring out which filing status you want to go with. When choosing a filing status, it’s important to acknowledge that whatever category you select can directly affect your refund’s size.
Choosing your filing status that best suits your tax needs can influence the outcome of your tax return and sometimes marriage filing separately can help result in a larger tax deduction as opposed to a joint return.
Overlooked Tax Deductions
There are many tax deductions that not many taxpayers are aware of and commonly missed. The deductions you’re eligible for can make a difference in your tax refund. Among them include state sales tax, reinvested dividends, out-of-pocket charitable contributions, student loan interest, and child and dependent care credit.
State Sales Tax: You can figure out how much state and local sales taxes you are able to deduct by using the IRS’s calculator tool.
Reinvested dividends: This isn’t necessarily a deduction but it can reduce your overall tax liability. When you automatically have dividends from mutual funds reinvested, it’s good to include that in your cost basis. Cost basis is the original value or purchase price of an asset or investment for tax purposes.
Out-of-pocket charitable contributions: Donating tons of money to official organizations isn’t the only way to get a write-off. Keep track of all the qualified small expenses like ingredients for an amazing cake that you donated to a bake sale. It might come as a surprise to you how quickly these couple of charitable expenditures accumulate.
Student Loan Interest: If you meet all the requirements, you are qualified for the student loan interest tax deduction. You can deduct this even if you didn’t pay it yourself because if someone else pays the debt, the IRS treats it as if you were given money and used it to pay the student loan.
Child and Dependent Care Credit: For 2020, up to $6,000 of qualifying expenses can be used for the Child and Dependent Care Credit.
Optimize Your Individual Retirement Account (IRA)
Contributions to a traditional IRA can lower your taxable income. If you’re at least 50 years old, the catch-up provision can help you grow your IRA. Although Roth IRA contributions aren’t tax-deductible, they qualify for the valuable Saver’s Credit if you meet the income requirements.
Maximize Your Health Savings Account (HSA)
Pre-tax contributions to an HSA can help lower your taxable income too. There are certain requirements that must be met in order to contribute to an HSA which are to be enrolled in a health insurance plan that has high deductibles that meet or exceed the IRS’s required amounts and also the health insurance plan must also have maximum yearly out-of-pocket expense cost ceilings that comply with the IRS’s requirements.
Resolve Your Tax Bills
If you’ve found yourself in a nasty mess with the IRS, take a deep breath. For taxpayers who may have difficulty paying off an excessive amount of tax debt, there’s a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program. Any issues regarding back taxes, unfiled years, or any other tax-related problems may be solved through one program; the IRS Fresh Start Program!
How Simple Is Qualifying?
Considering that the Fresh Start Program is a federal program, you would think meeting the qualifications may be very difficult, but really, it’s a lot simpler and quicker than you think. Take the following steps in order to find out if you are eligible in as little as 3 minutes.
- Fill out some basic information about yourself and your back taxes here.
- Have a representative reach out to you to discuss your eligibility.
- Go through the enrollment process and finally reduce or eliminate your tax liabilities.
