Tax season is over! What to know in preparation for next year.

Posted on April 15 2014

Clicking the button to e-file your taxes is usually followed by exhaling a huge sigh of relief. You know then that you have until next year to go through the process again.

You may also be feeling some excitement as you anticipate your tax refund. But, before you take taxes completely off your mind, take a look at these key things you should know about and act on in preparation for filing your taxes with OnePriceTaxes next year.

File paperwork as it comes in
Completing your tax return is easy, as long as you have all of the numbers you need. Instead of having to dig through a whole year of paperwork, set aside your tax-related documents throughout the year.
You can even organize several file folders so you can sort the documents as they come in. Proof of income, business-related forms, itemized deductions, and documentation for tax credits are a few sorting categories you might find useful. Then it will be easy for you to answer the OnePriceTaxes interview questions next year to complete your tax return.

Save your receipts
You may have found that you weren't able to claim some tax deductions or tax credits because you didn't hold onto your receipts this year . These receipts are critical for knowing how much money you spent on things like business expenses, medical bills, or charitable contributions. File all of your tax-related receipts so you can add up your spending for your tax return next year. Then hold onto them for at least three years after you file in case you are flagged for an audit and need to show your receipts to prove your tax deductions and/or tax credits.

Adjust your withholding if needed
If you were due a huge refund or had to pay a huge tax bill this year, then your withholding is probably a bit off. It is easy to correct it so the amount withheld from your paychecks is closer to what you owe in taxes next year. Just file a new Form W-4 with the human resources department at your employer. The worksheets on the form can help you figure out how many personal allowances to claim, and you can also list an additional amount you want withheld from each paycheck.
Evening out your income throughout the year can help you budget more easily. Withholding money from your paychecks during the year can help save you from being stuck with a huge tax bill to pay after having spent all your money during the year. It can also save you from living on an incredibly tight budget all year, only to find that you are due a huge tax refund. For example, if your refund was $2,400, that means you could have had an extra $200 in your bank account every month last year instead of getting the big refund check now.

Consider ways to shelter income from taxes
Another part of preparing for your tax return next year is taking steps now to reduce your taxable income. There are many ways that you can shelter your income from taxes, but you need to do it throughout the year.
Health Savings Account: If you are on a high-deductible health insurance plan, you may be eligible to open a Health Savings Account, also known as an HSA. You can contribute up to $3,300 to the account during the year, or $6,550 if your family is covered by the health insurance plan. If you are at least 55 years old, you can contribute an extra $1,000. The money you contribute to an HSA is not counted toward your taxable income. You can either set up the plan through your employer and contribute through payroll deductions or set up the plan with a bank and contribute directly from your checking account.
FSA for health care or dependent care: Some employers offer Flexible Spending Accounts, which are also known as FSAs. Depending on the type of account, you can use the money for health care or dependent care. You tell your employer how much you want withheld from your paychecks during the year, and the whole annual amount is available to you right away. You usually pay the costs out of pocket and submit receipts for reimbursement from your employer. Money remaining in an FSA at the end of the calendar year is generally forfeited, so be sure to spend it all so you don't lose it.
Pre-tax contributions to retirement account: Money you save for retirement can be deducted from your taxable income in most cases.
Traditional IRA, 401(k), and several other types of retirement accounts qualify, although Roth accounts do not qualify. If you expect to be in a low tax bracket during your retirement, it is often more advantageous to deduct contributions from your income now to save on taxes in the present, rather than getting tax-free disbursements from a Roth account later.

File early next year to get your refund earlier
Lastly, remember that the earlier you file your tax return, the sooner you will get your tax refund. Not only do you get your tax return in line for the refund sooner, but processing times are generally shorter at the beginning of the tax season, too, so the line moves faster. Having the money in your bank account earlier will help you plan for the year. And if you happen to not withhold enough during the year and end up owing taxes next year, it's helpful to know earlier in the year so you have a couple months to come up with the money before the April 15 deadline.
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