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3 Ways to Beat the Tax Season Blues

February 14, 2018 Wise Dollar Money Management No comments

Are you looking forward to tax season? Of course not! No one looks forward to tax season ? well, that is, unless you are getting a refund.

If you expect to count yourself among the many people who will have to pay taxes this coming April, you are probably dreading the arrival of the deadline. We can?t do anything to make paying your taxes more fun. But, we may be able to provide some advice on getting through this part of the year with less stress.

1. Start Saving ? Now

If you expect to pay, there is nothing better you can do than to start saving for your tax bill right away. Of course, if you are supposed to pay estimated taxes on a quarterly basis, keeping up with those payments throughout the year should take the stress out of the deadline.

As long as you have paid enough estimated tax, the actual deadline won?t be much of a threat. Simply file your paperwork on time. Make any small payment that might be necessary to level your debt. Then, move on. By waiting any longer to start thinking about the taxes you will owe, you are only going to make the problem worse.

2. Get Help

While we like to advocate saving money wherever and whenever possible, sometimes it actually pays off to spend a bit of money. That could be the case when it comes to getting tax help. If you have a particularly complicated tax situation, or if you just don?t want to have to deal with the paperwork on your own, hiring an accountant to do the job could be a wise investment.

This is especially true if the accountant is able to find deductions that you would have missed. Or, if they can save you time that will be used to actually make money. Not everyone needs to retain help with their taxes, as some people have a very simple and straightforward tax situation. If yours is complicated, however, think about getting help and the peace of mind that goes with it.

3. Be Organized

One of the stressful parts of tax season actually has nothing to do with making tax payments. It is just about simple organization. If you aren?t organized, you might stress yourself out trying to find all of your documentation.

Any time you get a tax form in the mail, like a W-2, place it in a specific folder in a dedicated spot in your home, such as the office. If you stick to the rule of always placing your tax documents in the same folder, you should have no trouble tracking them down when the time comes.

Likewise, if you get digital tax information through your email, save those to a dedicated email folder that you can access while preparing your return. Organization is a key component of a lower-stress life. This is certainly true when the topic at hand is taxes.

With these tips, you’ll be able to navigate through another tax season successfully.

Do you expect a tax refund this year? How do you handle tax season stress?

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5 Tax Strategies to Consider Before the End of the Year

September 27, 2017 Wise Dollar Saving One comment

No one likes to think about tax strategies. However, whether you want to acknowledge it or not, tax season is coming around again ? just as quickly as it did last year.

To make sure you can get through the tax season without doing any unnecessary damage to your budget, it is smart to start thinking about your taxes as soon as possible.

With that in mind, we have outlined five tax strategies below which you may want to consider prior to the end of the year. Of course, before you go ahead with any tax-related plan, it is always a good idea to speak with a qualified accountant.

Put Money in Your 401(k)

This tip is probably not breaking news, if you know anything at all about taxes and savings. Typically, the money that you contribute to a 401(k) is going to be made before taxes are considered, meaning that you will have a lower overall taxable income. Of course, this strategy is about more than saving money on your taxes ? it is just as much about saving for the future. Growing your 401(k) as much as possible now will pay off in a big way down the line.

Pay Attention to Losses

Do you own anything which has experienced a capital loss? If so, those items could be used to offset the amount of capital gains on which you have to pay taxes. Think carefully about all of your assets to make sure you don?t miss out on a valuable tax benefit.

Make Donations

Giving to charity is a good idea for a number of reasons. For one thing, you will be helping people in need ? and that is always valuable in any situation. Also, you will be doing yourself a benefit at tax time, as charitable donations tend to be tax deductible. Take some time to find charities which are close to your heart and make a donation that will help out all involved.

Make Sure Your Covered

Do you have health insurance? If not, you may wind up paying costly penalties on your taxes in the coming year. By covering everyone in your household with a qualifying insurance plan, you will be protected against both tax fines and unexpected medical costs. It is a good idea to have health insurance anyway, and the added bonus of avoiding a tax penalty makes it all that much more attractive to sign up for a plan.

Save Even More

Looking for more ways to save money while benefiting your tax situation at the same time? Look into the possibility of opening an IRA account. An individual retirement account is another way to put away money for your later years, and you may be able to get a deduction as a result of your smart planning. Saving money might not always be the most exciting thing you can do, but it will almost always benefit you in the long run.

What are some of the tax strategies you use to save money? Have you used any of these tax strategies before?

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4 Last Minute Money Saving Tax Moves

March 15, 2017 Wise Dollar Money Management 2 comments

As the the tax deadline draws closer, there are a few?money saving taxes moves you can still make.

Naturally, most people would prefer to pay as little tax as possible, while still complying with all of the rules and regulations of the tax system. Each individuals tax situation is a little bit different. But these four last minute money saving tax moves may be able to help you save on your tax bill.

Up Your 401(k) Contribution

Typically, any donations that you make to a 401(k) that is offered by your company will be taken out before taxes. When that is the case, you will be effectively lowering your taxable income for the year ? while still being able to save that money for later.

Obviously, this is a tip that has plenty of other benefits aside from taxes, as using a 401(k) is a great way to save some of your money for later in life. It is never too soon to start saving up for retirement, so look at 401(k) contributions as an option that can help you in both the short and long term. You can make a lump sum contribution up until April 15th to help save on your taxes.

An Early Mortgage Payment

This next tip is a minor one, but every little bit helps when it comes to saving on your taxes. If you own your home, consider making your January mortgage payment a few days early in order to slide it in before the calendar year is up. Of course, it’s too late for this year, but you can do this next winter.

The mortgage interest that you pay on that payment may be deductible, so it can serve to slightly lower your overall taxable income. Of course, that means that your payment won?t be a part of next year?s tax picture, so this is really a case of just moving the savings up by a year.

Give to a Charity

It is always a good idea to find room within your budget for charitable contributions. Picking out a charity that is close to your heart for regular donations is a great way to give back to the community around you. In addition to the good that you will be doing, there are tax benefits to donating to charities as well. Your donations are going to be deductible in most cases (make sure to keep documentation), so you can subtract those donations from your taxable income. Finding a way to save on your taxes while helping others at the same time is a great way to approach this topic.

Avoid the Health Insurance Penalty

Sometimes, the best way to lower your tax bill is simply by avoiding having to pay penalties. One of the newest penalties that you can face on your taxes is the charge for failing to have a qualifying health insurance plan.

If you did not have health insurance for this past year, there may not be anything you can do to avoid the penalty ? but you certainly can look for coverage now to avoid having to pay the fine again next year. In addition to steering clear of a penalty, adding health insurance is a good idea in order to protect your financial future.

Are you planning to use any of these money saving tax moves? How else do you plan to save on taxes?

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How to Ease the Burden of a Large Tax Bill

February 13, 2017 Wise Dollar Money Management 5 comments

Now that the holidays are over and everyone is back to school and work, it’s time for the next big event of the year. Tax season!

Some people rush right in to see their accountants and get their taxes prepared right away. In fact, some of these people may actually be done with their income taxes already. Then there are those like me, who wait until the end of March, or even into April, just barely beating the deadline.

When it comes to income taxes, you will either end up owing taxes or receiving a refund. Being as close to zero as possible is best. If they owe, most people might have to pay in up to a couple hundred dollars. That’s not too bad. But, what if you receive a tax bill for a couple thousand or more? What do you do then?

Here are some ways ease the burden of a large tax bill.

Breathe!

If you do get hit with a large tax bill, just breathe. It’s ok to take a couple of minutes to panic. But then you need to start calming down so you can make a plan. You can and will get through this.

Double Check Your Return

If the amount you owe seems incredibly high ?and you haven?t had any major?changes to cause it, such as a huge increase of salary, losing dependents, etc., there might have been an error in filing. If you did your taxes yourself, double check it. When?you still can’t find anything wrong, it might be worth hiring a professional to check it too.

If you think your tax professional made a mistake, go talk to them. Get a second opinion if needed. This could be as easy as a typo and getting your numbers double checked is worth the extra expense if you can lower you tax bill.

File Your Return

When your taxes are prepared you will see how much you either owe or how much your?tax refund for state and federal?will be. Even if you owe a larger sum than expected, go ahead and file it with the IRS by the deadline. Waiting to file until you have the money will land you with penalties, as well as potentially giving you red flags for next year?s return.

Find a Way to Pay

Depending on the amount owed, this may be as simple of a solution as dipping into savings to pay the balance. If you don?t have an emergency fund or that much in savings this can be a problem.

Look at pulling from other accounts and investments if you can. Try not to pull from retirement accounts unless you absolutely must. Withdrawing funds from a retirement account can have negative tax implications for next year. Pay as much as you are able at the time of filing. Paying anything is better than paying nothing.

Work With the IRS for a Payment Plan

The IRS wants your money and will work with you to get it. If you can’t pay your entire tax bill, work with them to create a payment plan.

There is still a penalty for this, and you must make the monthly payments on time and in the full required amount. But it’s still better than not paying at all. Opting for a payment plan means the IRS can put a lien on your house or other property if you default on payments. You can also get an extension but this is only for filing, not for paying. Once filed, you must pay. The IRS will get your money one way or another.

Plan for Next Year

This year may hurt, but to avoid this happening again, you can prep for next year. Look at what deductions you take and what more you should be saving. Talk to your accountant before the end of the year to see what your taxes may look like. It?s better to be safe than sorry.

Though these steps may not seem like they would ease your stress, knowing what you are up against will help. Making a plan and knowing your options makes owing taxes less intimidating.

Have you ever had a large tax bill? How did you manage your large tax bill?

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