5 Things to do After You File Your Tax Return
By thinking ahead, you can get your finances in order now so that you can have an easier time when tax season is here again. Even though you may not want to think about taxes during the offseason, taking a little time now will save you a lot of time and money in the future. In this article, we will go over 5 things to do after you file your tax return to make things easier for the next year.
Keep Your Records
You should keep tax returns and their supporting documents for up to seven years after you file. This will help you in case you are ever audited. It will also help you prepare for the following year, showing you what documentation, you should keep track of.
Be Careful with Investment Choices
Things, like selling stock or buying investments that pay dividends in a taxable account, can cause you to rack up a tax bill. Choose your trades and purchases wisely to help prevent a hefty tax bill at the end of the year.
Additionally, you may want to utilize an IRA or 401k investment account. These will allow you to trade freely because taxes are not owed until you withdraw funds from the account during retirement.
Determine Your Proper Withholdings
If you find yourself often owing taxes each year, the problem may be as simple as the fact that you are not having enough withheld from your paycheck. You can solve this by filling out a new W-4 with your employer and having more taxes withheld. The same is true in the opposite situation. If you often get large refunds, you may want to lower your withholding amounts.
Prepare to Claim Tax Breaks
Make a list of credits that you could potentially qualify for. Determine the limitations and requirements of the credits. If you qualify, make sure to keep receipts and paperwork involved with claiming the credit. Keep them in a centralized place and update and add to them throughout the year.
Use Your Refund Wisely
If you ended up with a refund this year, be sure to use it in a way to help better your financial standing. You can use it for such things as creating an emergency savings fund, paying off debt, funding a Roth IRA, or buying life insurance.
If you complete these 5 things after you file your tax return, you will be in a better place for this year’s taxes. However, if you continuously find yourself owning substantial sums to the IRS, these 5 tips may not be enough. You may find it to be advantageous to meet with a qualified tax professional. They can help you with a tax plan. They will analyze your financial situation and give you comprehensive, in-depth, advice on how to lower your tax burden. The sooner you implement one of these plans, the better off you will be in subsequent years.
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