6 Things To Remember When Preparing Your Taxes

Be Sure That You Know The Best Ways To Optimize Your Filing Strategy

Tax season is here and in full swing.  If you haven’t started preparing your taxes yet, remember that it’s always a good idea to start sooner than later.  There are oftentimes questions and unknowns, so be sure to give yourself enough lead time to ensure a timely filing. 

For the 2016 tax season, there are a few changes that you can expect:

  • Filing date- this year’s filing date is Monday, April 18, 2016 due to Emancipation Day.
    • Tax brackets are rising- most tax brackets are adjusted for inflation, and this year, they are rising by around 0.4 percent.
    • Estate tax exemption is rising- this year, the estate tax exemption will be $5.45 million due to inflation, a rise from $20,000 last year. It looks as if this figure will rise next year as well.
    • Personal exemptions are rising- the allowable personal exemption amount will be $4,050 this year, a $50 increase.

    Preparing Your Tax Filing

    There are a few key things you’ll want to remember when you are preparing your tax filing. These are ways that can optimize your filing strategy and possibly even increase your tax return.

    1.  Itemize tax deductions. You already know about the standard tax deductions, but don’t forget to itemize all possible deductions you can legitimately claim to see how it affects your return. Some miscellaneous expenses like work-related vehicle mileage costs or job-hunting expenses can become deductions if the combined amount adds up to more than 2 percent of your adjusted gross income.

    2.  Provide dependents’ Social Security numbers. Whether you have children or file as ‘head of household’ with dependents, you’re going to need their Social Security numbers to claim any credit. If you’re divorced and claiming a child, make sure that your ex-spouse isn’t also claiming the same dependent or your return could be delayed.

    Remember, each child under 17 provides a child tax credit of $1,000 per child.

    3.  Organize your records and documents. You could miss out on some significant deductions if you’re scrambling to find receipts and proof of expenses while filing your taxes. It’s a simple strategy, but incredibly effective. Make sure to get all of your paperwork in order before filing.

    4.  Contribute to your retirement accounts. You may be filing for taxes incurred in 2015, but that doesn’t mean you’ve hit the deadline for contributing to your retirement accounts. You have until April 18 of this year to fund your traditional or Roth IRA account. These deductible contributions can help lower your tax bill.

    5.  Lower your taxable income. Taking above-the-line tax deductions – such as moving expenses for a job, the tuition and fees deduction and the educator expense deduction – can all reduce your taxable income and save you money at tax time. Also, if you purchased health insurance in the health insurance marketplace and received a premium tax credit, you may get an even bigger premium tax credit when you file your taxes if your taxable income is lower than expected.

    6.  Talk to your financial advisor. Taxes can be overwhelming, especially if you’re juggling deductions and expenses.

    Your financial advisor knows plenty of strategies to maximize your return and is informed about current IRS rules, to help you avoid any future audits or penalties. It’s always worth running your return by your advisor in case any red flags show up.

    Have you started to prepare your taxes yet?  Remember, if you have questions and need additional help, it’s always best to consult a qualified tax professional- it will be worth it! 

    For additional valuable tax filing strategies for yourself or your business, please download our e-book, the 2016 Tax Filing Guide.

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    Disclosure:  This information is provided to you as a resource for informational purposes only.  It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors.  Past performance is not indicative of future results.  Investing involves risk including the possible loss of principal.  This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.