It's easy to put off thinking about taxes until the end of the year or more likely until April 14, but with a couple simple steps you could make next year's tax time - less taxing. Here are some tips, to-dos, and strategies that can save you time and money.
Are all the receipts and statements you've collected since January organized? Now is a great time to set up a filing system so you can store and find your important documents easily. Some things you might not think of keeping with your tax documents, but should, include receipts for home improvements, your paystubs, medical and dental expenses, charitable donations, vehicle sales tax, alimony payments, and last year's tax return. Wait - what if you didn't file last year's tax return yet?
If you were like approximately eight and a half million other Americans, you used an automatic extension of time to file your 2015 taxes. Use summer to break away from the masses and don't wait until the last minute to finish your taxes. Without the time pressure, you can take your time and learn about all the credits and deductions you may be able to use to save some money. Common mistakes and missing out on tax saving opportunities are often due to the stress that comes with waiting until the last minute. If you don't have a tax pro or DIY tax preparation software, then use the IRS Fee File - if you didn't file your return or an extension you can still use the service. If you don't want to be bothered with preparing your return or learning about deductions and credits, summer is also a good time to find a tax pro.
Reputable tax professionals are available year round and summer is a great time to schedule appointments and interview a few to find the best fit for you and your situation. Much like turning your mattress or checking your oil, a little care and preventative attention can save you time, money, and stress come tax day. Some things you might want to do with a tax pro are reviewing last year's return, talking about how the first half of this year has gone, and asking what tax saving strategies they might suggest.
Some strategies require planning but others are pretty simple to use. For example, if you are you sending your kids to camp you might be able to add the costs to your child and dependent care credit. Though sleep away camp doesn't qualify, day camp costs can be used toward claiming the credit. If you purchased healthcare through the Marketplace be sure to report appropriate changes to help you avoid getting too much or too little advance payment of the premium tax credit - you should report changes on an ongoing basis. If you don't report changes and you get too much you may get a smaller refund or have to pay some of the credit back. And, finally, though I'm the guy that says big refunds are good (they are), by simply adjusting your withholding so you pay less taxes in each pay check you will take more of your money home for the rest of the year. Keep in mind; before you adjust your withholding you should take into account life or pay changes because if you don't have enough taxes withheld you will end up owing taxes, which is never fun! There are some simple steps to estimate your tax picture and figure your withholding that I'll share with you in a couple weeks.
Though reviewing your flexible savings account (FSA) balance won't save you on taxes it could prevent you from losing money. Since we are almost half way through the year, if you haven't used about 50% of the account by now then you might want to consider how you can adjust your expenses so they occur before the end of 2016. In many cases, FSA's are a use it or lose it deal as the money is forfeited if not used.
Taking the time to look at your taxes now may save not only time, but also money; keeping more of your money is always a good thing.