Can I start this out by saying I hate taxes? Yes they are necessary and yes, I file them every year, but I certainty don’t do it with a smile on my face. Aside from the fact that filing taxes bores me to death, I also hold a sour taste in my mouth when it comes to tax season. This all stems from my trip to the Accountant this year which resulted in me paying over $1,000 in federal taxes. Yup,a middle class working girl who makes decent money and already pays an ton of taxes out of her paycheck owed the government a lot of money on April 15th.
The reason that I found myself in this mess (and piratically in tears) was because I have allowed my distaste for taxes to make me ignorant to my own financial income. I relied on what turned out to be bad advice, to determine my tax-fate and paid for it greatly. You can all be sure that I have learned my lesson (the hard way) on the importance of knowing your shit when it comes to getting in front of your tax return. Here are some tips I picked up while paying out this tax season.
The reason I got myself into the mess that I mentioned earlier is because I chose the wrong withholding elections on my Form-W4. Why did I do this? Because rather than researching the elections or asking a professional what withholding option to chose, I leaned over to the girl next to me at work and asked if putting a two on that line sounded good. It’s okay to not be an expert at taxes and the endless amount of tax forms that exist. It is not okay to just take a guess and never look back. Before you sign your name to any tax document, make sure you understand what the information you have provided means and if you don’t, ask the professionals who are paid to know!
I cannot begin to tell you how many years have gone by where I have not reported essential deductions when filing my taxes. What I should really have just said is I cannot begin to tell you how much money I have not been paid by the government for things I have done throughout the years. I have donated endless bags of clothing to the Goodwill and I have donated time, supplies, and money to charities all around Philadelphia. Doing good deeds like this pays off in more ways than one and it’s silly to skimp on little deductions like this when filing your taxes. Be sure to keep receipts and take notes of all the things you do throughout the year so that you are able to earn money back in your return.
While it is good to be early on filing your taxes (who doesn’t want money back sooner?) it’s more important to be prepared. Make sure that you have received all of the tax forms that you need for your filing before you actually sit down to file. This includes health insurance forms, your W2, the 1098-E forms for school loans, and any forms that may come from Trust Companies if you have taken a distribution of any kind from a 401(k) or IRA. Even if you have to file for an extension, it is better to be a little late then to have to go through the hassle of filing an amendment with the IRS.
I used to think that because I file single and don’t own a home that I knew everything I needed to know about filing my own taxes. Why pay some guy in a suit to punch a bunch of numbers in the computer when I can do that myself? Yes, getting an Accountant or Financial Advisor to assist you may add additional costs to filing your taxes; however, the benefits can often outweigh the price. These guys are experts in helping you find deductions and write offs during the filing process and they can also help you evaluate your finances so that you are getting the most from your future tax returns. This is not to say that you have to use them every year or at all, but if you find you are struggling when it comes to setting financial goals and sticking to them, stop being cheap and start being smart!
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