The year is almost over, and we should start preparing to file our income tax return if we haven’t already. This can be a very daunting task for many of us, especially when we are still not very familiar with the process. Thus, we have decided to share with you five tips for tax season 2020 that you should consider following. This way, you will make sure you are making the most out of the process, taking advantage of different benefits and deductions.
Make Contributions to Your Retirement Account
One of the best ways to take advantage of tax benefits is by making contributions to our retirement accounts. So, if we haven’t started a retirement account, we should consider opening one before April 15, 2020. These contributions come with many tax advantages, as deductible contributions can help us lower our tax bill. Besides, all the contributions we make will compound tax-deferred, which is an opportunity hard to pass on. Just remember that for 2019, the maximum IRA contribution is $6,000, or $7,000 if you are 50 or older by the end of the year.
Consider Making an Estimated Tax Payment
One common scenario we might be facing is not having paid enough to the IRS during the year, which means we may have a large tax bill waiting. There are several reasons why this could happen, such as withholding on our paycheck not having been enough, or having received a large gain from selling stock. In order to avoid owing any underpayment penalty, we must cover 100% of last year’s tax bill or 90% of this year’s. When you calculate your estimated tax payment, try not to pay too much, as the IRS might take long to issue the corresponding refund.
Take Advantage of Home Office Tax Deduction
Taking advantage of home office tax deductions is one of the most underrated but useful tips for tax season 2020. Whether we are self-employed, remote workers, or simply have the option of working from home, requesting this deduction is easier than we think. Writing off expenses linked to the portion of your house that is used exclusively for doing business can be quite simple. These expenses include rent, utilities, and insurance, for example. Before applying for this deduction, make sure you are eligible for it, as it tends to be considered as a red flag for an audit if we don’t legitimately qualify for it.
File Your Taxes Electronically
Many taxpayers prefer to send their income tax reports by mail out of tradition, but filing electronically might be more convenient. This is particularly true for the taxpayers who are expecting to receive a refund next year. When we file our taxes electronically, the IRS processes returns faster than those sent by regular mail. Also, we are more likely to file an accurate return, since the IRS will check to make sure the documents are complete. Lastly, if you file your taxes electronically, you will get a confirmation where the IRS acknowledges they received your return, which doesn’t happen when we send paper returns.
Think About Getting Professional Help
If we want to make sure we follow these and other useful tips for tax season 2020, we should consider getting professional help. Hiring a tax advisor can help us file our returns accurately and in a timely manner. Besides, they can inform us of other deductions we might be eligible to request, and ensure we apply for them correctly. When looking for a tax advisor, make sure you do a bit of research before hiring someone. Asking for qualifications, credentials, and expertise is important to avoid hiring the wrong advisor.