Learn From My Mistakes: 6 Tax Tips
The first quarter of a new year, and it's everyone's favorite time. TAX TIME! Yeah! This year I thought I had a better handle on the tax stuff, but apparently I still had a few more things to learn. Here's things in the past that I screwed up on taxes.
1. Organization. It's an obvious tip, I shouldn't even have to tell you this. But this year I really thought I was organized. Every single paper I got that was tax related, I put in a folder. Except one. That's where the picture comes from. I couldn't find a 1099. I swear I had read it and put it in a folder. Then, after double checking my paperwork before I went in to the accountant, I panicked. I couldn't find it anywhere!!! I went ape shit and dug through every single bill, envelope, or letter in the entire house. Turns out, it was in the glove box of my truck. Boy did I feel stupid, especially after I called my wife in a panic.
2. Know what you need to save. Tax laws change every single damn year. What could be a tax credit one year, isn't for the next. If you're doing your own taxes, check the IRS.GOV website. Otherwise make a phone call to your accountant, and better yet, know what you need to save for the next year. It's easier to put away a receipt you can use for a write-off as soon as you get it, than dig for it at tax time.
3. Decide if you really need someone else to do your taxes. This is a mistake I made this year. My fees easily reached over $400, and I realized I could have done it myself. A big thing is if you need to do itemized deductions. I assumed I would, but with being married the standard deduction doubled, meaning I didn't even need to itemize. I could have saved a lot of money if I had spent a couple of hours researching ahead of time.
4. File as early as you can. By law, all w-2's, 1099's, and other income statements need to be mailed out by your employer by the 31st of January. So it's pretty safe to say that in mid February you can get started, if not earlier. I've been surprised before with having to pay in. If you find this out on the tax deadline in April, you don't have much time to budget it out. The sooner you know what shape you'll be in, the better you can plan.
5. Don't spend your return before you get it. We assumed from one year to the next that we would be getting the same return as before. Not the case. I had already started making bigger payments on credit cards and such, thinking I would be having a large chunk of money coming in. Even worse, I had already planned where I was going to spend all of that return. It just makes it more depressing if you don't get the return you were hoping for.
6. Make sure your W-4's are withholding the right amount of taxes. There is a lengthy calculator on the IRS website to figure out what number you should put down for your withholding. This will help make sure that the IRS isn't taking too much money or too little money. I always try to put down 0 or 1, just so I know they are taking ENOUGH taxes. Because I hate to pay in. Either way, a good rule of thumb is when you look at your check, at least %10 should be taken out for taxes. I'm more comfortable in the 15-20 percent range. Oh and from experience, if you've recently got married or divorced, you better check this!