This article, written by Brad Dorfman, was originally published on Citi’s Women & Co.
The 2014 tax season will be getting off to a late start, due to the government shutdown. The IRS recently announced plans to open the 2014 filing season on Jan. 31, as it needs extra time to program and test its tax systems. But the filing deadline for individuals remains April 15, a date set by law.
While that’s still months away, there are some steps you can take now to help avoid headaches later and maximize your end result.
1. Gather your documents.
Make sure you have everything you need to track potential deductions, including: receipts for charitable donations, mortgage statements, and brokerage statements. Businesses don’t have to send out W2s and 1099s until January 31, but you can get everything else together beforehand. Then, when the IRS is accepting filings, you can get yours in more quickly if you’re expecting a refund, or know how much you owe ahead of time so you won’t be hit with any last-minute surprises on April 15.
2. Try to lower what you’ll owe.
If you’re self-employed and have already set up a retirement account, it’s not too late to put more money in and lower your 2013 tax bill. The deadline for opening the account was Dec. 31, but you can make contributions right up until April 15, 2014. Remember, though, that there are restrictions on early withdrawals. So don’t put in money that you think you’ll need access to anytime soon.
3. Assess what you’re already paying.
If you’re self-employed, you’re probably already aware of the need to make quarterly estimated tax payments over the course of the year or risk penalties. But did you know that you also need to factor any prizes, rental income, alimony, interest and dividends into the equation? Generally, if you expect to owe $1,000 when you file your taxes for 2014, you need to pay quarterly, according to the IRS. The IRS also offers a much more detailed explanation here.
If you think you’re not withholding enough money, you can usually ask your payroll department to increase the amount taken out of your paycheck.
4. Decide if you need a professional tax preparer.
Some questions to consider: How aware are you of this year’s tax code changes? How complicated is your return? Many preparers charge more based on how many schedules you need to file. How much is your time worth? Do you want to spend hours preparing your taxes or use that time to do something else? The bottom line: If you don’t feel confident that you can file accurately on your own and pay the lowest amount of taxes you legally owe, consider paying a professional. Even if you do file on your own, it may be worth having a professional review what you’re doing every few years to make sure you’re not missing anything.
5. Take advantage of financial planning tools.
Step back and see if there are things you want to do differently next year. If you are a Citi customer, Citi® Financial Tools can help you set up a monthly budget and analyze expenses to help you gain greater control of your financial life.
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