Introduction
Filing tax returns can be a complicated and unnerving experience. Most of us may not be aware of the provisions and technicalities of filing our taxes. Hence, it is good to hire a CPA or tax professionals to file on your behalf. The following tips can help you to increase your tax refunds:
Check Your Filing Status
Checking your filing status should be the first thing on your priority list before filing your taxes. Nearly 96% of the married couples in the U.S. file their taxes jointly which is not always the best option for them. You can avail of greater tax deductions while filing your taxes separately. The child tax credit is also available to separately filing spouses with less than $200,000 in adjusted gross income. The credit limit is $2,000 per child. You can also lose out on a few deductions that are exclusively available only for joint filers. It is better to consult a tax professional to determine the best filing status for yourself.
Hire a Reputed Tax Preparer
It is always better to hire a CPA or a reputed tax professional to file your taxes. You will have to pay a fee for hiring these tax professionals. It is recommended to hire a tax professional for preparing and filing your taxes much before the due date. If you wait till April to do this, you may be charged more by the tax professionals. Such a last-minute rush is not good and you may have to compromise by hiring the services of tax professionals who are not busy to file your taxes. You can also opt for a refund anticipation check (RAC) by the tax preparer. The tax preparation fee and charges will be deducted from your refund before you receive it in your bank account.
Know the Tax Deductions
An average taxpayer may not be aware of all the available tax deductions. There are many simple tax deductions available that are most commonly overlooked by taxpayers due to a lack of knowledge of it. You can claim tax deductions on charity miles. It is fully deductible at 14 cents per mile till the year 2019. If you drove 100 miles per week in a year for charity purposes, then you can $728 as a tax deduction (52 weeks x 100 miles x $0.14 per mile). Generally, not many are aware of this tax deduction. You just need to maintain a clear log book with dates and miles clocked for the purpose of availing this tax deduction.
Another commonly overlooked tax deduction is jury duty fees. If you were paid a jury duty fee by your company and your employer wants you to handover the jury duty pay from the court, then you can use that amount as a tax deduction.
Maximize Your IRA and HSA Contributions
Maximizing your IRA and HAS contribution is a good way to save taxes. Traditional IRA contributions can reduce your taxable income. You can get benefited by taking advantage of the maximum contribution. If you are 50 years old and above, then the catch-up provisions can further add to your IRA.
If you make pre-tax contributions to a health savings account (HSA), you can qualify for tax deductions. You can make HSA contributions up to April till the tax filing deadline. You should fulfill certain requirements to make contributions to your HSA. You should have a health insurance plan with high deductibles, meeting or exceeding the IRS’s required amounts. You must not have first-dollar coverage and should not be a part of Medicare. You should also not be claimed as dependent on someone else’s tax return to make a contribution to HSA and claim tax deductions.
