Would you like to pay the lowest legal amount of federal taxes? Fortunately, there are five very easy ways to make sure your tax bill as low as it can be. Keep in mind that these techniques are fully legal and are used by many people every year. When it comes to paying your fair share of taxes, there are no shortcuts or magic tricks that can reduce the amount you owe. However, there are some commonsense ways that can take the sting out of the annual financial ritual.
File on Time
This simple piece of advice can save you a substantial amount of money. Procrastination, forgetfulness, call it what you will, is the reason so many taxpayers miss the filing deadline by one or more days. If you really miss the boat and file more than 60 days late, you’ll pay a hefty fine of at least $435. So, even if you use a CPA or a filing service, make doubly sure they file your paperwork before the deadline.
Deduct Student Loan Interest
Many people forget one very substantial above the line deduction when they file. Above line items refer to amounts by which the IRS allows you to reduce your taxable income without the hassle of itemizing. There aren’t many of these, but one is student loan interest. High-income earners aren’t entitled to the entire income reduction, but other filers can subtract the amount of interest on student loans, up to $2,500 per return. And, when it comes to repaying those education debts, there’s another piece of good news in that borrowers can refinance all their student loans through a private lender and wrap them all into a brand-new loan. Simply use an online refinance calculator so you can know what to expect to pay for the new amount.
Know How Extensions Work
Another little-known bit of financial wisdom is that you can get an automatic four-month extension to file your taxation paperwork just by asking. What’s the catch? You still have to pay what you own on time. The extension only applies to the return, i.e., the paperwork. So, if you do opt for the four extra months, remember to send a check for whatever you owe, on or before the formal filing deadline.
Use a Paid Preparer
For around $50 you can hire a professional to do this unpleasant chore for you. It’s almost always worth the expense. What will you get for your money? For starters, paid preparers will give you hard and digital copies of everything, will file on or before the cutoff date, will triple-check all the math on the forms, and some will even represent you before the authorities if you are called in for an audit.
Maintain a Good Filing System
Keep all your forms, receipts, backup papers, documentation, and everything you use to prepare your filing. Maintain all of it in a secure digital and hard-copy form. In this case, digital can simply be photos of the pertinent documents on a disk. For convenience and your own records, keep it all for 10 years before deleting or trashing the files.