Filing a tax return never seems to be a walk in the park. Instead, there’s always some form missing or a confusing question you’re not sure how to answer — all of which can leave you stressing out about tax season.
Just because this tax season may be a bit stressful doesn’t mean every tax season needs to be moving forward!
Instead of scrambling to find everything you need at the start of each year, we recommend following a tax planning strategy throughout the tax year so you can have peace of mind come tax season. By taking the time to understand how taxes work, which tax strategies you should take advantage of, and how your deductions may impact your tax return, you’ll feel more confident come tax season.
In this beginner’s tax planning guide, AA Tax & Accounting Services shares some tried and true concepts that will allow you to manage your money more effectively and avoid costly tax mistakes.
Maintain an organized filing system
Come tax season, there’s always that one document you need that you can never seem to locate — but that doesn’t always have to be the case! Instead, you should start a filing system that organizes all tax-related documents you acquire throughout the year. This allows you to not only have your documents when you need them for the upcoming tax season, but you can easily refer back to previous years as needed.
Your organization system can be a physical filing cabinet with folders for various tax years, or you may opt for a fully digital filing system. Stick with whichever method you choose for a full year to see how it works out for you (you can always readjust for the next tax season).
Determine tax deduction requirements
The pandemic has brought on many changes to tax deductions available to the average taxpayer. Be mindful of all deductions available to you, and take the time to understand what requirements you need to follow to claim them.
Do this early in the year so you can plan ahead rather than scrambling come tax season. In some cases, you will be able to claim the deduction before filing your tax return.
Understand tax credit requirements
Every year the IRS makes certain tax credits available to taxpayers that can offer significant opportunity savings on income taxes since they reduce your actual tax bill on a dollar-for-dollar basis.
Similar to tax deductions, these credits change each year, which is why you must stay on top of what is being offered and learn if you meet the criteria to claim them.
Utilize an IRA for savings
Where do you keep your savings?
If you answered a traditional bank account, we recommend making a change before the upcoming tax season. We recommend using an Individual Retirement Account (IRA) to hold your savings instead of a traditional savings account.
Using an IRA will help you avoid paying tax on the interest each year since the deposits to an IRA will accumulate tax-free.
Tax consulting services in Cedar City, Utah
Do you still have questions about your tax planning strategy?
If so, AA Tax & Accounting Services can help you better understand the tax planning process to minimize stress and maximize your tax refund. AA Tax & Accounting Services is prepared to give you the answers you need.
No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience of navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.
The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.