Just because you filed your tax return doesn’t mean you don’t need to think about taxes
for the rest of the year. What you do now may affect the tax you could owe or the refund
you expect next April.
Organize your tax records
Develop a system that keeps all your important information
together. You can use a software program for electronic recordkeeping or store paper
documents in labeled folders. Throughout the year, add tax records to your files as you
receive them. Having your records readily accessible will make preparing your return
easier and may help you discover potentially overlooked deductions or credits. Notify
the IRS if your address changes. Notify the Social Security Administration of a legal
name change to avoid a delay in processing your tax return.
Identify your filing status
Your filing status is used to determine your filing
requirements, standard deduction, eligibility for certain credits, and your correct tax. If
more than one filing status applies to you, use the Interactive Tax Assistant to help you
choose the one that will result in the lowest amount of tax. Changes to your family life —
marriage, divorce, birth and death — may affect your tax situation, including your filing
status and your ability to claim certain tax credits and deductions.
Know your Adjusted Gross Income (AGI)
Your AGI and tax rate are important
factors in figuring your taxes. AGI is your income from all sources less any adjustments
or deductions to your income. Generally, the higher your AGI, the higher your tax rate,
and the more tax you pay. Tax planning can include making changes during the year
that lower your AGI.
Check your withholding
Since federal taxes operate on a pay-as-you-go basis, you ‘ll
need to pay most of your tax during the year as you earn the income. Use the IRS
Withholding Calculator to check your withholding when your personal or financial
information changes. Provide your employer with an updated Form W-4 if you want to
change how much tax is withheld from your paycheck. Changing your withholding and
having more withheld from your paycheck may lower your AGI and affect your tax bill or
expected refund. Consider completing a new Form W-4 each year and when your
personal or financial situation changes.
Save for your retirement
Retirement savings opportunities can also lower your AGI.
Contributing money to a retirement plan at work reduces your take-home pay and your
AGI. Contributing to a traditional IRA plan is another way to save for retirement and
lower your taxable income.
Benefit from tax credits and deductions
Your taxable income is what’s left over after
you subtract any eligible deductions from your AGI, including your standard deduction.
Tax credits reduce your tax when you subtract them from the amount of tax you owe.
Tax planning can help your overall financial planning. Start planning now to identify tax
savings year-round so next year’s filing season is less “taxing” for you and your family.