April 15—a.k.a. Tax Day, a.k.a. The Day of Financial Reckoning—is almost upon us. Are you ready? If your idea of preparation is making like an ostrich and sticking your head in the sand, only to emerge when the tax dust has cleared, you really need to find a new plan. That's where we come in.
Our lab-tested Tax Day money moves can help ensure that you're ready to meet your tax return maker, no fancy-schmancy computing required. So, stop wallowing in taxpayer self-pity, get out your debt consolidation calculator, and get ready to defeat the deadline monster head-on with these four steps.
Tax Day money moves
1. Organize your tax documents
If all of your documents are currently "organized" under your bed, it's time to get it together. Categorizing your papers in sections like "donations" and "insurance receipts" can help you avoid misplacing important paperwork. Don't expect to drop off a pile of receipts with an accountant on April 14th at 11:59 p.m. and expect them to wave their financial fairy wand to turn your mess into tax return magic. You need to give them time and some semblance of catalogued papers for them to do their job correctly.
2. Consider making an IRA contribution
You have until Tax Day to contribute to a traditional or Roth individual retirement account to save on taxes this year. In 2021, you can put up to $6,000 in either type of account, or $7,000 if you're 50 and over. Making a contribution can be extremely helpful if you're straddling two tax brackets. The extra money might demote you to the lower bracket, which can save you in both income and capital gains taxes.
3. Decide on standard vs. itemized deductions
Decide whether you're going to take a standard deduction or itemize your deductions. A standard deduction is a flat amount that's taken out of your taxable income. With itemized deductions, you list out your deductions on Schedule A, which are then deducted from your income.
Common itemized deductions include:
- Charitable donations
- Medical expenses
- Investment interest expenses
- Home mortgage interest
- Property, state, and local income taxes
If you don't have substantial amounts in these areas, it probably isn't worth your time to itemize.
4. Reassess your spending
You can take tax time as a marker to revisit your financial goals and progress. Are you on track to meet your goals, or do you need to tweak your spending? How's your credit score? Have you checked your credit report recently to ensure that there aren't any mistakes? Take a moment to check in with your current financial habits to see what's working and what needs to change. Some self-reflection can set you on a path toward financial success for the coming tax year.
These money moves can help Tax Day feel like just another day on the calendar instead of a black hole of despair. Get organized, consider contributing to your IRA, decide how you want to deduct, and reassess your spending—there's always a way to save more. Bon voyage and enjoy your trip to Tax Day success!
Please note: Due to the COVID-19 pandemic, retirement and health contributions have been extended until May 17, but estimated payments are still due April 15.
Press Release Service by Newswire.com
Original Source: 4 Money Moves to Make Before April 15
