February 13, 2014
With tax season in full swing, you are likely busy compiling all of your tax documents and expense receipts to support the preparation of your return. When you think about it, there is a lot you can learn from preparing to file your tax return. It provides the perfect snapshot of where you stand financially, which can offer important insights into your money management habits. While there are many different components that impact your finances, three key questions to consider when it comes to your taxes include:
Are You Saving Enough for Retirement?
You can tell by looking at your tax return whether you made the maximum allowable contribution to tax-advantaged retirement saving options. If you didn’t this year, you may want to consider looking into setting up a Roth IRA, or another eligible investment account. Business owners who have SEP-IRAs but aren’t making their full contribution may also want to increase them.
Did You Maximize All Available Tax Deductions and Credits?
There are some deductions and tax credits that many taxpayers are aware of, and many more that they are not. By taking the time to review your tax return with our firm you can learn about all of the options you have available to you to lower your tax obligations.
How Should You Use Your Refund?
In addition to making sure that you take the appropriate steps to maximize your tax refund, you should also consider what you do with it once you receive it. One option is to have your refund deposited directly into a savings or retirement account, effectively reducing the temptation to spend it right away. Another smart use for your refund is to use it to pay down any debts that you may have.
If you have questions about your financial situation, remember that we can help. Our team of financial professionals are dedicated to working with clients like you throughout the year to help you ensure that your tax return represents the financial picture you desire.
If you’re claiming deductions for business meals or auto expenses, expect the IRS to closely review them. In some cases, taxpayers have incomplete documentation or try to create records months (or years) later. In doing so, they fail to meet the strict substantiation requirements set forth under tax law. Tax auditors are adept at rooting out inconsistencies, omissions and errors in taxpayers’ records, as illustrated by one recent U.S. Tax Court case.
If you’ve ever yawned your way through a wordy, boring document, you might have wondered if your own writing was as hard to understand. Luckily, there’s a great tool to measure the readability of your writing, and it’s as close as your word processor. (Note: For this article, we use Microsoft Word as our example. Details will vary if you use another application.)
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