How to File Your Taxes and Save Money

There have been significant changes to individual income taxes after the Tax Cuts and Jobs Act of 2017. By knowing how to file your taxes correctly, you can avoid underpaying or overpaying them. Also, you may qualify for tax deductions or tax credits that can reduce your tax burden. Here are some things you should do to file your taxes and save money.

Maintain Receipts for Business Purchases Throughout the Year

If the IRS asks to see the documentation of your business purchases for the year, you must be able to furnish it at once. So, it is a good idea to save all receipts, bills, check stubs, and anything else that you can show as proof of business expenses. You may be able to bring down your taxable income to some extent if you itemize all your annual business purchases.

Gather All Needed Documents Before Starting

To simplify the tax filing process, it is a good idea to gather all the documents you will need before you get started. These documents can include receipts of property taxes, unreimbursed medical bills, and any charitable donations you made. You will also need to provide your Social Security number and your birth date. Additionally, you will need to fill and submit Form 1098, Form 1098-E, Form 1099, Form 5498, and Form W-2.

Check for All Available Deductions and Exemptions

As per the Tax Cuts and Jobs Act of 2017, there are no longer any personal exemptions on tax returns between 2018-2025. However, you may be able to save money by using the tax inflation adjustments that the IRS allows. These include the annual exclusion for gifts, the Alternative Minimum Tax exemption, and the foreign earned income exclusion. You can also make deductions on your home office, first-year expenses, health insurance payments, contributions made to Simplified Employee Pensions or Individual Retirement Accounts, and utility expenses.

The Pros and Cons of Free Filing If You Qualify

If your annual income is equal to or less than $69,000, you are eligible for filing your taxes electronically with the IRS Free File software. If you have a higher income, you can use the Free File Fillable Form. The main benefit of free filing is that you can do it on your own and avoid the extra expense of hiring an accountant.

For assistance with filing, the IRS offers the Tax Counseling for the Elderly program and the Volunteer Income Tax Assistance program. The IRS also recommends commercial tax preparation software and e-file providers for tax filing convenience.

Opt to Use Professional Help

Get tax assistance from a professional tax accountant if your tax situation is complicated or you are not confident about filing on your own. They may be able to find opportunities for potential savings that you might have missed and can also assist you in resolving your tax debt.

By filing your taxes correctly and on time, you can avoid having to pay interest on tax debt and penalties on late payment. Don't forget to save a copy of your filed tax return. You might need to refer to it next year.

Rahul is a renowned author and social media enthusiast.