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Wondering how to maximize your tax return and get a bigger refund? You’re in luck—we’ve got some tips that can help you out. We’ll cover everything from deductions to savings accounts to tax software in this brief guide.
So, without further ado, here are seven top tips to help you learn how to get the most out of your tax return.
Tip 1: Check Your Filing Status
If you use an accountant at tax time, make sure you tell them if you get married, get divorced or experience any other life changes. The relationship you’re in—or not—on December 31st determines your filing status for the whole of 2020. Filing statuses include:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widower
You can only file using the head of household (HOH) status for 2020 if you:
- Are unmarried on December 31st
- Paid more than 50% of the costs of maintaining your home in 2020, AND
- Have one or more dependents living with you for at least six full months in 2020
Head of household usually gives you a tax advantage, so if you can, go for HOH over single filing status.
Tip 2: Claim All Available Deductions
Itemizing this year? Delve deeply into deductions to make sure you don’t miss any tax breaks. Popular deductions include:
- Medical costs
- Charitable donations
- Prepaid interest on a mortgage
- Education expenses
Deductions come off your gross income, reducing your AGI and the amount of money you have to pay taxes on. If you play your cards right on the deduction front, you could put yourself in a lower tax bracket.
Do You Get a Bigger Tax Refund if You Claim 1 or 0?
Want to learn how to maximize your tax refund? If you claim a dependent on your W4 form, you’ll get more money in your paycheck but you’ll receive a smaller tax refund—and you could owe tax. If you don’t claim a dependent on your W4, you’ll take home less money each month, but you’ll get a bigger tax refund at the end of the year—or you’ll break even.
Tip 3: Report All Income
You have to report all eligible income on your tax return. If you don’t, you could get into serious trouble with the IRS if your returns are audited in the future. If the IRS discovers unreported income, you’ll have to pay interest and penalties—and that can amount to a lot of money.
Before you file your return, consider all your sources of income for 2020. Include things like:
- Income from contract work
- Interest on your savings account
- Dividend payments
You might want to use a spreadsheet to keep up. It might seem old school, but spreadsheets can help you stay on top of small amounts of 1099-related income throughout the year.
Tip 4: Double-Check Your Math
Math errors on tax returns are common. If you use paper forms or fillable forms on the IRS Free File site, examine them closely before you hit the submit button. A tax preparer or accountant can help you if you have a complicated tax situation.
You can avoid a lot of math errors if you use tax software. TaxAct®, for example, guides you through the tax prep process and offers tips along the way. The version of TaxAct for simple, federal returns is free—and Deluxe, Premier and Self-Employed tiers offer great value for money. Click on the button below to get 25% off TaxAct products today.
Tip 5: Contribute to Retirement and Savings Accounts
Don’t leave money on the table at the end of the tax year. If you can, use all your Flexible Spending Account (FSA) dollars by December 31st. If you have a 529 college savings plan, contribute as much as you can during the tax year to reduce your tax burden.
Don’t forget to:
- Contribute up to $6,000—or $7,000 if you’re 50 or over—to your traditional and Roth IRAs by April 15th, 2021.
- Contribute up to $19,500—or $26,000—to your 401k plan in 2021 to maximize your 2021 tax refund.
Tip 6: Triple-Check Your Bank Account Details
Whatever you do, check your bank account details twice before you submit your tax return. If you mistype digits, you won’t get your refund as expected—and it might take a while to correct your mistake.
Tip 7: Get Your Taxes Done on Time
You need to submit your 2020 tax return by the April 15th, 2021 deadline. Paper returns must be postmarked by April 15th, and electronically filed returns have to be in by midnight in your time zone. If you need extra time, you can file an extension, which will give you until mid-October to file your taxes.
7 Tips on How to Maximize Your Tax Return | Credit.com. https://www.credit.com/blog/how-to-maximize-tax-return-140296/.