6 Actions to Take This Fall for a Smooth 2016 Tax Season

6 Actions to Take This Fall for a Smooth 2016 Tax Season

by Brendon Pack, October 2015

As they say, fall is in the air. This can only mean one thing – the 2016 tax season will be here before you know it. Fortunately, to make your IRS filings next year a little easier, there are some tax tips you can take this fall.

1. Clarify Your Tax Filing Status

Did you marry your high school sweetheart this year? Are you and your spouse expecting a baby before Dec. 31st? If you’ve had – or could still have – any significant life changes in 2015, your tax filing status may change from the last time you filed with the IRS. This is because you may be able to file jointly with your spouse for your 2016 taxes, whereas you might have been an individual filer before. Head-of-household filing status is another possibility if your parenting situation changed this year. You may also be eligible to claim a new dependent on your return if you had a baby, which can help reduce your tax bill.

If nothing major has changed in your life, you will probably be good to go using the same filing status you used this year.

2. Organize Your Tax Documents And Financial Records

Another important IRS tax tip involves carefully organizing all of your tax documents and other important financial records now so that you’re prepared to easily find them during the 2016 tax season. Along with submitting Form 1040 to the IRS, you may need to verify the tax deduction and credits on your return by including receipts or other forms of documentation. The IRS wants to ensure you are legitimately claiming tax breaks, so they may need to see this information spelled out more clearly. Let’s say you donated your ’89 Chevy to a charity and received a handwritten acknowledgement for this contribution. Be sure to keep and include this document in order to claim your donation as a write-off.

Create a folder with all tax-related documents so that you know where they are and can easily access them when filing season arrives. Consider digitizing these records as well on your password-protected computer. Getting everything together now can make your life so much easier in the spring.

3. Determine How You’ll File Your Taxes In 2016

Decide how you’ll prepare taxes in the spring. Do you plan to handle them all by yourself? Would you rather let an experienced CPA ensure you receive all eligible tax savings and guarantee you are compliant on all fronts? Whichever route you choose, make this decision now so you’ll know what to do when the IRS opens the filing season.

4. Estimate How Much You’ll Owe, and Will Get Back

Whether you’re a math whiz or can’t stand working with numbers, there are some simple ways to project how your tax situation will play out after you file. Examine how much income you have earned in 2015. Determine how many tax deductions, tax credits, and other tax relief you plan to claim (i.e. the home office deduction, the Dependent Care Credit, etc.). Clarify which income tax bracket you will fall into – and whether this rate may change compared to previous filings. If you’ve earned business income this year, account for this figure, and estimate how much you hope to earn the rest of the year. Once you’ve run these numbers, you can get a basic idea of how much you’ll owe and any refund amount that may be coming your way.

5. Save Some Extra Money

Although you may not owe much in taxes next year, or you anticipate a nice fat refund check, it’s wise to have money at your disposal to make tax payments every year. The last thing you’d want is to get hit with hefty late-filing and late-payment penalties because you didn’t have the cash in hand at the time. If you set aside 3-5% of your biweekly paychecks, you can be certain to have the funds to cover your tax bill.

6. Research Your Tax Deductions And Tax Credits

Perhaps one of the most important tax saving tips involves researching your tax deductions and tax credits. Our lives can change from year to year just like IRS tax deductions and tax credits do. So update yourself on the latest tax breaks to ensure you take full advantage of any tax savings you deserve.

Let’s say you welcomed your first child into the world. Now you can claim the Child Tax Credit. Perhaps your daughter – a dependent – just enrolled at the local college. You may be able to claim the American Opportunity Tax Credit. If you launched a catering business over the summer, don’t forget about deducting business startup costs, the home office deduction, and the vehicle deduction. It’s smart to make a list of eligible tax breaks now rather than scrambling in April to find the ones for which you’re eligible.

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