Filing your taxes can be stressful and costly. Courtesy of Earn It! Keep It! Save It!, a free tax preparation service offered in partnership with United Way Bay Area, here are simple ways to make tax day easier on your mind and your wallet.
TIP #1: Keep all your tax information in one place
Save yourself the stress of scrambling to find information at the last minute Starting now, choose a central place where your tax-related forms and records can be kept. Put new documents here the minute you get them. That way, everything from income records to medical expenses will be at your fingertips when you need it.
TIP #2: See if you're eligible for tax credits
A tax credit is a dollar-for-dollar reduction of the income tax you may owe. There are several credits you could qualify for, based on criteria like how much money you make and whether you are raising children, paying for education or saving money for retirement. Some important credits are:
- The Earned Income Tax Credit (EITC)
- The Child and Dependent Care Credit
- The Lifetime Learning Credit
TIP #3: Make sure you're withholding the right amount
Having some money withheld from your paychecks lets you pay taxes “as you go” instead of as an annual lump sum. If the amount is correct, you’ll have money in hand throughout the year and won’t owe too much come tax season. Take note of how you do on your taxes this year and make adjustments accordingly: lower your withholding if you’re due a big refund and raise it if you owe additional taxes.
TIP #4: Take the long view
If you avoid filing taxes now because you’re afraid of owing more than you can pay, late fees and penalties will put you in worse shape in the long run. Refund anticipation loans are another example of poor long-term thinking. You might have faster access to your refund, but fees and interest charges mean you’ll pocket less of it in the long run. A better solution is to file your return electronically and have the refund direct-deposited to the bank.
TIP #5: Don’t go it alone
As if filing taxes wasn’t complicated enough, new tax law changes have made it even more challenging to take advantage of all your eligible credits and deductions. But the good news is that you don’t have to become a financial expert or pay to get help from one. Through the United Way Bay Area’s Earn it! Keep it! Save it! program, a professional will prepare and file your state and federal taxes for free. To learn more and find a free tax site near you, go to earnitkeepitsaveit.org.