Did you know that the right to impose Federal Income Tax in the United States was passed on July 2, 1909? When it comes to filing your own income tax return, you want to make sure you save the tax tips in our guide below. We have put together these essential tax tips to ensure that next tax season is less stressful.
Read on to learn more.
1. Organize Your Records
Although being organized will not cut your taxes, it is going to save you time and might also come with some financial rewards as well. Many people struggle to gather all their documents when tax season comes. You want to take the time to gather all your W2s and 1099s, and receipts.
The key is to stay as organized as possible all year and be careful to not throw away any tax related documents throughout the year. Take the time to group similar documents together and put them in different folders.
2. Contribute to Retirement Accounts
Another tip we have is to fund your retirement account for 2022. The deadline to contribute to a traditional IRA is the tax return filing due date. When you make a deductible contribution it will help you lower your tax bill.
Another bonus is that your contributions are compound tax-deferred. Keep in mind that for 2022, the max IRA contribution that you can make is $6,000 or $7,000 if you are 50 years of age or older by the end of the year.
3. File and Pay on Time
If for any reason you can’t finish your return on time then you want to make sure you file Form 4868 by April 18, 2023. This will give you an extension until October 16, 2023. When you file your extension, make an estimate of what you believe your tax liability is and pay the balance you have due with your request.
Keep in mind that filing late means you will have late fees. The IRS can charge you a penalty of 5% per month of the taxes you owe on top of a late-payment penalty of 0.5% a month of the tax due. 25% is the maximum late filing penalty the IRS can charge you.
Make sure you check out these IRS tax penalties for a better idea on the penalties you want to avoid.
4. Electronic Filing
Electronic returns are processed faster than paper returns. When you file electronically you can expect your refund 3-6 weeks earlier than paper returns. If you opt to have your money deposited right into your bank account or your IRA then you can expect to wait even less time.
Ready to Apply These Tax Tips?
Now that you have our top tax tips, your life will be a bit easier when income tax season comes around. Please do not skip out on filing taxes because you might find yourself in legal troubles in the future.
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