A recent study revealed that there are tens of millions in America that don’t even start to think about doing their taxes until the first week of April. However, the best way to reduce your annual tax bill and make sure that you get your paperwork filed on time is to start preparing before the end of the year. If you get a head start on it now you could save hundreds if not thousands of dollars when you file.
Step One – Take Stock of Your Situation
The first step is to get a rough estimate of your income for the year plus any deductions you have paid so far. The best way to figure this is to look at your pay stub from your employer. This will give you a pretty accurate accounting of your current year-to-date income plus any contributions you have made to your 401(k) program or anything else that will need to be included in your tax configurations.
Then, go through your checkbook or look at your checking account statements from St Anne Credit Union in New Bedford to look for charitable donations you might have made to a church or community program and look at your mortgage statement to get an idea on how much mortgage interest you paid throughout the year. Once you get a ballpark figure on income, deductions, donations and paid interest, you can begin to estimate your current tax bracket and start looking at making your plan of action.
Step Two – Check Your Retirement Savings
One way to boost your annual tax refund is to put more money directly into your retirement savings program. You can get an Individual Retirement Account (IRA) savings plan through St Anne Credit Union in New Bedford or you might contribute to a 401(k) or other employer-sponsored retirement savings program through your job. Traditional IRAs and 401(k) investments will give you a dollar-for-dollar reduction in your taxable income.
Check to find out about any restrictions or contribution limits, however most limits start at around $5,000 for IRA retirement savings and $17,000 for 401(k) accounts. This can help reduce the amount of money you might owe or boost the amount of your refund just by making the appropriate contributions in November or December before the year is up. Check with your credit union in New Bedford about your IRA retirement savings account. You can still make retroactive contributions up until next April, however the earlier you can make the contributions, the better.
Step Three – Look for More Deductions
This is the time of year to get your deduction “ducks” in a row. Giving to charity is one of the easiest ways to increase your deductions when you file your taxes. The only way charitable contributions can be claimed is to itemize your deductions, so if you don’t want to take this extra step, don’t worry about it. However, it is worth the effort to at least do the math on what the difference would be if you itemized versus taking the standard deduction.
Homeowners can claim interest paid on mortgage loans, taxes paid to the DMV for registering your car, required union dues for workers, charitable contributions, medical payments and much more. You can verify some of your charitable contributions throughout the year by looking at your checkbook record or by viewing your checking account statements with your credit union in New Bedford. Just make sure that you make all of your payments or contributions that are eligible to be used as deductions before the end of the calendar year.
Step Four – Create a Year-End Checklist
The best way to make sure that you maximize your deductions and get the best return on your annual taxes is to be organized. You won’t even start getting your tax forms and your W-2 form from your employer until the month of January, and tax forms from brokers and mutual funds aren’t usually available until the middle of February. However, you can start making plans and getting everything in order ahead of time.
Create a checklist so you can monitor these items as they come in the mail or are made available to you online. Your mortgage interest statement from the bank, W-2 forms, 1099 forms and any other essential documents should all be listed and checked off when received. If you do not receive your forms in a reasonable amount of time, make sure to contact your Human Resources Department at work or check with another financial representative to make sure you get your documents in a timely manner. A checklist can help you stay on top of these forms, giving you enough time to file your taxes and get your return.
St Anne Credit Union in New Bedford Can Help
There are so many ways that your New Bedford credit union can help you with your tax preparation all year long. Through opportunities such as IRA retirement savings programs, timely checking account statements and other investment and savings opportunities, St Anne Credit Union in New Bedford can help you stay on top of your tax documents and financial accounts to make tax time a lot less frustrating. Contact your credit union representative today for more information on programs and opportunities available to our members.