Have you finished your taxes. You can expect a refund, or maybe you knew you'd have to pay taxes when you file your return.
Anyway, writing more than a small check to the Internal Revenue Service is an experience you would prefer not to repeat
What can you do to avoid it in future
Check out these tips to reduce the tax bill next year.?
Focusing on better tax planning
regarding taxes, planning is always better than waiting until December 31.
income tax last year is the first place to look when you start planning for a new tax year.
See if there are ways that you could plan better, or you may qualify for tax relief in the future.
tax planning should mean fancy accountants or financial maneuvers difficult.
It can be as simple as holding capital assets that have increased in value until they qualify as gains in long-term capital, or ensure that your sale of a residence meets the requirements for the exclusion of any gain.
maximize pension contributions deductible
You may be able to reduce your tax bill by paying deductible pension contributions.
Traditional IRAs are a good start, but have fairly low annual contribution limits. You may be eligible for other pension plans that allow you to make much larger contributions -. And reduce your tax bill at the same time
Of course, the non-deductible contributions to retirement plans such as Roth IRA are another option [
However, the best pension plan is the one you really contribute. If getting a tax deduction now helps motivate you, this is not a bad thing.
Consider quarterly reviews
It is a good idea to look at your tax situation more than once a year. Even with a predictable income, things change over time. Four examinations per year is ideal for many people.
To see how you made during the tax year, collect your pay stubs with year to date amounts and other information.
You can use the TaxAct tax calculator to estimate your refund.
Increase your withholding tax on income
Before changing your withholding tax on income, be sure that you actually need.
If you had a windfall tax last year, as some profitable trades stocks or temporary extra income, you may be fine for this year. Do not rush this year overpay, just because you had to pay last year.
If you are an employee, it is easy to increase your withholding tax on income. Just file a new Form W-4 (Do not send to the IRS.)
One thing you can do is to reduce your withholding allowances -. Under quota restraint generally result of having more the withheld income tax
You can use the easy form W-4 Withholding tool TaxAct (log in and click on the "Next Year" ) to determine how an additional allocation will change your pay.
You can also have more successful by checking the "Married, but withhold at higher single rate."
In addition, you can adjust your withholding by entering a flat amount of additional tax you want your employer to withhold.
Whenever your financial situation or your estimates change, you can always file a new Form W-4 with your employer.
Make estimated tax payments
another way to avoid a big tax bill at the end of the year is to make estimated tax payments during the 'year. If you choose this option, keep in mind that the tax payments are due four times a year.
However, you can still make tax payments at any time.
For example, let's say you sell an investment and make a large profit in October. You can wait and pay any tax on gains of capital on January 15, or even when you file your tax return, depending on your situation.
However, by that time, it may be more difficult to find the money to pay your tax bill.
Nothing prevents you to estimate your tax windfall important when you get it, and either placing money into a special tax account or send it to the IRS immediately.
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