The time you spend preparing for the coming tax season could save you money in the long-run. With the start of a New Year, it is beneficial to be aware of your yearly financial standings. Be prepared for this year’s tax season by following these five steps.
Prepare your records: It is important to remain ahead of the game when it comes to getting the most from your tax return. According to the IRS, it is safe to keep tax returns on record until the statute of limitations runs out for the specific tax return. Generally, it is a safe bet to keep taxes on file for at least three years. During this time, the IRS can weigh extra taxes while you may also be able to claim a refund. Play it safe by keeping your taxes on record for at least seven years if you have additional assets such as a business or property.
A year in review: As the year ends, tax season begins. The best time to review and reassess your financial standings is to review all important financial documents, bank and brokerage statements, along with retirement and savings plans. It will be easy to keep important documents on file once you have looked over each one to know your financial standings at the years end.
Be aware of tax law changes: Note any changes that may have occurred and discuss them with your tax advisor. It is best to stay in the know when it comes to parting with your hard earned money. Tax laws that expired with the start of the New Year, more commonly referred to as the ‘fiscal cliff,’ will increase taxes for 90% of Americans, according to the Tax Policy Center. Middle-class taxpayers will likely see an increase of nearly $2,000 with the increase in tax rates.
Set goals for the coming year: A comprehensive year-end-review, along with the knowledge of the tax law changes will give you an idea of where you would like to see yourself, financially, in the coming year. Whether you choose to meet with a financial advisor to help pave the road to setting all goals that you hope to meet or would like to do it yourself, the best approach to setting and meeting goal(s) is to focus specifically on a certain area such as retirement savings or personal savings.
Ask questions: Once you have had the chance to review your information, keep a list of questions or concerns that you might have along with issues that you have faced in the past.
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