There are about six more weeks until Tax Day – that’s April 18th this year. HawaiiUSA Federal Credit Union will share some tips to help you avoid feeling the tax crunch by getting ahead on your tax “to dos”.
The complexity of your finances can help determine whether you should hire a professional to file your taxes. If you’re employed, receive a W-2 Income form and only have a few deductions, you have several options: file it on your own; purchase software like TurboTax; or if you meet earned income limits, there are organizations that help you file in person or online for free. . On the other hand, if you have a more complicated situation – say you own a business, earn rental income, or encountered a big life event such as getting married or purchasing a home – you may want to consider hiring a CPA, Enrolled Agent, or Tax Attorney. Just be sure to book an appointment early since many tax preparers’ calendars fill quickly.
It helps to review last year’s filing and create a document checklist. Common tax forms include:
- W2 – annual wage and salary income
- 1099s – non-wage income. Most common is the 1099-INT, listing interest from your financial institution accounts.
- 1095 – relatively new forms that deal with health insurance.
- 1098 – Tax deductible expenses, such as mortgage interest on a primary residence, or higher-learning expenses.
- Receipts from charitable donations and medical expenses.
Some key steps include deductions, credits, and retirement contributions.
- Deductions decrease the amount of income being taxed. Your software or tax professional can advise whether you’ll save more money by taking a standard deduction, or itemizing your expenses.
- Credits reduce the amount of taxes you owe. So claiming eligible tax credits are a great way to help you save. Common ones are education, child or dependent care, or energy efficiency credits.
- Did you know you can still make 2016 tax-deductible contributions to your individual retirement account (IRA) until April 18? In some cases, this bonus contribution may reduce your tax bill, or boost your refund. It could lower your adjusted gross income to help you qualify for a large deduction or credit.
With everything fresh in your mind, now’s the best time to start on next year’s taxes. Do you anticipate changes like a new baby or second job? These events should remind you to adjust your withholding appropriately. Also, start organizing your paperwork. We suggest tracking things digitally – like using a phone app to categorize receipts or track car mileage. For more tax and finance tips, visit HawaiiUSA’s website: leapwithhawaiiusa.com