Month: August 2021

How to Reduce Your Tax Bill in 3 Simple Steps

No one wants to find themselves in a position where they owe additional taxes. This is why we always encourage individuals to think about their tax liability throughout the year. By keeping your taxes in mind, you can take strategic actions like pre-paying your next mortgage payment or making a charitable donation. While these are just a couple of examples of how you can reduce what you owe in taxes each year, they do have a deadline. If you don’t take these actions in a timely manner, you won’t be able to reap any benefits until your next tax filing.

Although we encourage staying on top of your taxes all year, we understand that life gets busy. There are plenty of situations where people have plans to take strategic actions, only to end up missing the deadline. If you find yourself in this situation and wish there was something you could do to help offset what you may owe in taxes, you’ll be happy to learn that there a few options available. Even if you find yourself getting down to the wire with the deadline to file your taxes, here are three different ways you can still reduce what you owe:

1. HSA Contributions

Does your health coverage include an HSA-eligible health insurance plan? If so, making a contribution as a family or individual can provide you with a deduction worth several thousand dollars. Just keep in mind that there have been quite a few changes in recent years as to exactly which plans are eligible, which is why it’s always a good idea to check with a tax professional first.

2. American Opportunity Tax Credit

If you’re the parent of a college student, the American Opportunity tax credit is a break you won’t want to miss. It’s worth up to $2,500 per eligible student for the first four years of college. The reason you can claim this credit even when time is coming down to the wire is all you need is a Form 1098-T, which will provide the EIN you need to include on your return.

3. (SEP) IRA Contribution

Whether you work for a company or are self-employed, you can reduce what you owe in taxes by making an IRA contribution. If you are self-employed and file an extension, you can make your contribution up until your return is officially filed.

At Donohoo Accounting Services, we understand the stress that can go along with planning and filing taxes. That’s why we offer tax planning and tax return preparation services. If you want to work with a team that has over two decades of tax experience, call us at 513-528-3982 for a free consultation.

 

The Best Ways to Reduce Your Tax Prep Bill

Working with a reputable professional to file your taxes can save you a lot of time. It can also save you money. However, plenty of people worry that they’re going to end up paying more than they want for tax prep services. While the savings you’ll get from working with someone who understands all the nuances of the tax code will almost always exceed the fee you pay, we want to take things a step further and share some tips on how you can keep your tax prep bill to a minimum:

Avoid the Temptation to Procrastinate

Tax season is a very busy time of the year. Tax professionals have a lot of people coming to them for help. So if you go to your CPA with a huge pile of documents that aren’t organized, chances are you’re going to be charged a higher fee due to the extra amount of work that’s involved. You can prevent this from happening by committing to staying on top of all your tax documentation throughout the year instead of trying to rush and bring it all together as the filing deadline is ticking down.

Create a System for Documentation

The reason so many people do procrastinate with their taxes is they think dealing with all the documentation is a major hassle. Even though it can be a little complicated, it doesn’t have to be a huge burden. The key is creating a system for how you’re going to keep all your documentation. Whether that involves physical folders or scanning your documents into a piece of software like Evernote, picking a system that works for you and then sticking with it will make a huge difference.

Check in Throughout the Year

Once you decide on your system for managing your documentation and then start using it, you’ll want to review how everything is going every few months. If you realize that something isn’t working as well as you expected, don’t hesitate to tweak your approach right away.

Get Rid of Documents You Don’t Need

This is an example of what you can gain by checking in throughout the year. You may discover that some of the documents you kept aren’t actually important. If that is the case, don’t keep them in your system. Getting rid of clutter will make it much easier for everyone when tax filing season comes around.

Whether you want our expert help filing your tax return or want to get a jump on things by working with us on tax planning, we’re here to help! Simply give us a call at 513-528-3982 to arrange a free consultation.