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Preparing for 2018 Taxes

Preparing for 2018 Taxes

 

            Unless you applied for an extension, filing for 2017 taxes is history.  Take a deep relaxing breath, and then it is time to beginning preparing for 2018 taxes. If you start your tax planning now, you may avoid a tax surprise when you file next year. Following are some tips from both the IRS and other financial experts on how to plan ahead for the inevitable – taxes! :

 

  • Take action when life changes occur.  Some life events can change the amount of tax you pay. Some examples that can do that include a change in marital status or the birth of a child. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4, Employee's Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator tool on IRS.gov to help you fill out the form.
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  • Keep records safe.  Place your tax returns and supporting records in a safe place. If you ever need your tax return or records, it will be easy for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid.
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  • Shop for a tax preparer.  If you want to hire a tax preparer to help you with tax planning, start your search now. Choose your tax preparer wisely. Use the Directory of Tax Return Preparers tool on IRS.gov to find tax preparers in your area with the credentials and qualifications that you prefer.
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  • Think about itemizing.  If you claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings.
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  • Know the rules for claiming dependents. Claiming a dependent on your tax return can make a huge difference to your taxes. The IRS allows you to take a $4,000 exemption for each dependent. In addition, you can claim certain expenses for dependents, such as childcare costs, medical expenses and tuition payments. The rules can be a bit complex if you share custody of a child with someone, help support an elderly parent, or if a relative or nonrelative lives with you.
  • Contribute to your retirement accounts throughout the year.  Yes, you can make your IRA contribution next April, right before you file your taxes. But will you have the money set aside then? It’s much easier to contribute earlier in the year or to put money aside from every paycheck. In addition, the sooner you put your money into a retirement account, the longer compound returns have to work their magic before you retire.

  • Consider reviewing your W-4 withholding. Did you get a large tax refund this year? You may want to think about adjusting your withholding. Withholding is the tax your employer takes from your pay each check. To update them, simply re-file your W-4 form with your payroll department. You can choose to update it whenever you want to throughout the year and TurboTax has a W-4 calculator to help you estimate your exemptions.

  • Make charitable donations before the end of the year. Contributing to charity or donating goods can reduce your tax liability when you file your taxes next year. To keep track and value your charitable giving or donated items throughout the year, use TurboTax Its Deductible. The app will help accurately value and track your donations and easily import the relevant information into TurboTax when it is time to file.
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