ByUSACash
Maximizing Tax Refunds and Getting a Larger Cheque
USACashMoney has a #lifelesson series to get you further than others
1. Maximize your Filing Status
You can only file using the head of household (HOH) status for 2020 if you:
- Are unmarried on December 31st
- Paid more than 50% of the costs of maintaining your home in 2020, AND
- Have one or more dependents living with you for at least six full months in 2020
Head of household usually gives you a tax advantage, so if you can, go for HOH over single filing status.
Also married filing jointly gives you tax advantages, typically.
2. File Your Taxes on Time
By filing earlier, you can get the refund sooner and the value of a dollar in hand is worth more at a future point in time. Also you can avoid any late fees and payments. ou’ll have to pay 5% of your unpaid taxes over a maximum of five months—and that adds up quickly. If you have to file your tax paperwork late, make sure you pay any tax owed by April 15th to avoid interest and mail your tax return or e-file as soon as possible afterward.
3.Claim All Available Deductions & Credits
Tax deductions are qualified expenses that can reduce your taxable income. Most taxpayers tend to focus on the most well-known deductions such as charitable donations
Common ones include charitable giving, including tithing to churches, synagogues, temples or mosques. If you made donations to any qualified charitable organizations, the value of the items donated may be deductible. It’s important that you keep all the receipts for the purchases of your donated items.
Credits are another way of reducing your taxable income. However, it can be said that they are more effective than deductions at reducing your tax bill. Credits are netted directly against the amount of income tax you owe, rather than merely reducing the amount of income upon which you owe tax, as tax deductions do
The Child Tax Credit and the Additional Child Tax Credit may be available to you if you have qualifying children. The Child Tax Credit (the Additional Child Tax Credit) is in addition to the Child and Dependent Care Credit.
4.Decide if you Should Itemize
Every taxpayer should take into account is whether or not they should itemize deductions. Generally, you should itemize your deductions if it results in a lower total taxable income than if you claim the standard deduction.
Making the choice to itemize your deductions is generally recommended if you:
- Incurred substantial unreimbursed medical and dental expenses in a given tax year
- Paid interest or taxes on your home or other personal property.
- Had large unreimbursed casualty or theft losses
- Donated large contributions of cash or tangible goods to a charitable organization
At the end, if you are unsure please reach out to your local CPA firm or an enrolled agent. A larger IRS refund will get you further than your neighbor in paying down debt and saving some for a rainy day.
