Let’s face it, taxes are complicated. Not just because you have to stick to rigid deadlines and do cumbersome record-keeping to calculate your tax refund, but also because the legislation behind the tax code seems to change each and every year. In order to steer clear of any trouble with the IRS, It is absolutely paramount that you learn about the new changes each year (or hire a professional).
2019 was a relatively easier year in terms of preparing your returns as there was a redesigned tax form along with a larger standard deduction. However, you can expect some changes this year because of new schedules and deductions. Also, tax brackets have now been adjusted for inflation. Besides being aware of these changes, there are some more things that you can do to have a seamless filing experience in 2020. Let us list them for you.
The first and most important tip to avoid trouble with taxes is by filing early as you can. Being on time ensures that you get your refund as soon as possible. The IRS will start accepting the returns for 2019 on January 27, 2020. So it makes sense to have them ready so that you can file them on time. While filing early is good from the refund perspective, it also keeps you free from the stress of missing deadlines or facing penalties due to late or missed filing. Also, it lets you hire a professional preparer without trouble because most of them get busy when the deadline draws near.
Another good piece of advice if you want to be easy with tax filing in 2020 is to consider filing electronically. This is something that the IRS recommends because it is a safe, easy and accurate way to file. There is always a risk of mails being delayed or even lost at the post office if you choose to file your return by mail. Conversely, e-filing eliminates this risk completely and also gives you the benefit of quick processing of your return.
Get help if you suspect trouble
If you suspect trouble with your taxes in 2020, such as an upcoming audit, you should take preventive action. Legal advice by an expert tax attorney is your weapon against the IRS in this situation. While a complication in your return may be one reason for getting a lawyer to look after your case, they are also needed to handle situations such as starting a new business and having a taxable estate. An attorney can negotiate an installment agreement with the IRS and even represent you in court if needed.
Have a good look at your paycheck
The withholding amount mentioned on your pay stub requires good attention if you want to breeze through the tax season in 2020. If an adequate amount of tax is not being withheld from your payroll tax cut, you will have to pay it at tax time. On the other hand, you will get a refund if too much is withheld from your paycheck. In any case, you need to double-check your paycheck to have a good look at the withholding.
Max contributions to retirement plans
Maximizing your contributions to retirement plans is a good idea if you have not funded to an employer-sponsored retirement account during the year. The amount you contribute to these accounts cuts down the value of your taxable income, which translates into a smaller tax bill for the year. The good news is that contribution limits have gone up in 2020, which means that you can save more taxes this year.
Check if you can claim a credit
Another way you can get smart with your tax bill in 2020 is by checking if you can claim a credit. Tax credits are important because, like retirement contributions, they can bring down outstanding amounts owed. A few tax credits go even further by enabling you to claim a refund when you do not owe any tax otherwise. The earned income credit is an example. The credit amount you can claim with earned income credit depends on your filing status and the number of qualifying children you have.
Expect the unexpected
As you head into the tax filing season of 2020, you need to understand that what worked last year may not work now. Seeing a seasoned lawyer is a good idea because they can guide you about the significant changes that are likely to affect your tax bill this year. Good advice always works, even if returns appear simple and straightforward on the surface.
With these useful tips, you are all set to handle your returns easily in 2020. While they will help you stay in good terms with the IRS, you can end up saving hundreds of dollars on your tax bill.