HOW TO BE A SMART TAXPAYER
After April 15th has come and gone, you may be ready to kick back until next year’s tax frenzy. But before you put your feet up, take a few minutes to review some simple steps that can ensure you come out ahead in 2016. No matter what your summer and fall plans may hold, keeping taxes in mind can make you a smarter (and more prosperous) taxpayer. The good news is its relatively painless, requiring you to do little more than decide how to spend and save your money.
If you didn’t have a health plan last year, you’re probably well aware of the associated penalties due at tax time. What you may not know, however, is that those penalties are on the rise. For 2015, every adult in your household who doesn’t have insurance is subject to a fee of $325 each ($162.50 per child) or 2% of your household income, whichever is greater. The really bad news? Those penalties will go up even higher next year. If you don’t already have insurance for you and your family, make this a priority. The fewer months you’re missing coverage, the less you’ll have to pay in penalties.
One of your greatest opportunities for tax deductions lies with contributions you make to a retirement account. If you haven’t already established such a plan, you can benefit handsomely by what you invest this year. A traditional Individual Retirement Account (IRA), for instance, allows for you to make a maximum contribution of $5,500. Depending on your income level, you may be able to deduct this entire amount. Even better, if you can only secure an independent, non-work-sponsored plan, you can deduct the full $5,500. For 401(k)’s, you can put in as much as $18,000 if you’re 50 and under. This amount can be deferred on your taxes. Retirement planning is always a good idea, but taking advantage of the tax breaks only sweetens the deal.
The Importance of Charity
The nice thing about helping others is that it’s something you can do throughout the year, when you’re in a position to do so. Provided your generosity extends to an IRS-approved organization, you can reap the rewards when you file your taxes next year. Be sure to keep receipts and any corresponding documentation for any donation. If you can’t verify your donations, don’t take the deductions. As long as you keep a solid record of your good deeds, you stand a good chance of offsetting your tax liability.
Any bonus or extra payout you received after January 1st, 2015 through the end of the year can mean trouble for your taxes. At the very least, make good use of your deduction options to avoid incurring a big bill in April of next year. You also want to pay attention to you income bracket, as too big of a financial boost may push you up a rung. In any event, always consider how your overall fiscal well-being may be compromised from any extras you earn this year.
Your Greatest Ally
Whether you’re simply planning your tax strategy for this year or you’re receiving worrisome IRS notices, you can always consider talking to a tax consultant. A licensed tax professional can not only provide additional insight on how to better manage your affairs, he or she can resolve any issue you may already be facing with the IRS. Being a smarter taxpayer means knowing when to accept help when you need it the most
Important info: Tax Schedule 2016
Past issues:Issue 1 - How to be a smart taxpayer | Issue 2: Gambling - Professional or Amateur?
Issue 3 - Crowdfunding | Issue 4 - Employee or Contractor |Issue 5 - Charitable Donations
Issue 6 - Rollover of IRA funds | Issue 7 - Did you start a business in 2016? | Issue 8 - Self-Directed IRA
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