Helpful End of the Year Tax Tips
Toward the end of each year millions of Americans begin to prepare for tax season. The majority of individuals who prepare ahead of time are expecting a return. Taxpayers who may be dreading the tax season or delay the filing of their return are often expecting to end up paying money to the government. There are a number of important end of the year tax tips that will not only help individuals prepare for tax season, but may also reduce the payment that may be owed to the IRS.
The most important tax tip that can ever be offered to taxpayers is to plan ahead. Too many taxpayers wait until the last minute to get their tax returns filed and that allows a large number of important tax credits or deductions to slip by. Although determining eligibility and the listing of tax credits or deductions may be time consuming there many Americans who lose hundreds or thousands of dollars each year by not doing so.
For individuals who estimate that they will owe money on their income taxes there are a number of ways to potentially lower the amount of taxes due. Charitable contributions are one of the most popular and commonly used tax deductions. Charitable contributions not only include cash, but merchandise as well. Just about every individual has clothing, toys, books, or other household items that they do not use. Donating these items to a non–profit charity that is approved by the IRS can be claimed as a tax deduction. For most tax payers making a charitable contribution will not completely wipe away the amount of money that they owe to the IRS; however, it may help to lower it. When making a donation it is important to receive a receipt or another document that proves a donation was made.
Many work related expenses can also be used as a tax deduction. This includes work-related expenses that are not reimbursed by the employer. As with a charitable contribution, work related expenses can help reduce the amount of money that an individual will end up paying the IRS. Many work related expenses are difficult to prove; therefore, all receipts for the items purchased should be kept on file. It may also be a good idea to keep a record of how and why each item was purchased and how it was used for work-related reasons. This documentation may be helpful just incase the IRS decides to perform an audit on a taxpayer with a large amount of work-related expenses.
Common work-related expenses that qualify as a tax deduction include work clothing or uniforms, travel expenses, education or job training, home office or classroom setup, or union dues. Since these deductions will be used on that years’ income tax it is not uncommon for many individuals to stock up on their work-related materials before the end of the year. All items must be purchased before the end of the year to be eligible as a tax deduction of the tax income of the current year.
The best way to prepare at the end of the year for tax seasons is to prepare all year long by saving important documents and receipts. Try to take advantage of as many year end tax deductions as possible.