More Tips for Boosting Your Tax Refund
5: Increase Withholding
In theory, the more money you make, the more taxes you're likely to owe. As any teenager or adult who's held a job in the United States knows, the amount of taxes withheld from each paycheck is determined when you fill out a W-4 form. It's simple: The more allowances you claim, the less money your employer deducts for taxes. You get one deduction for yourself, one for your spouse and one for every dependent in your household. Sometimes it makes sense for people to claim zero allowances, particularly if they're single or working multiple jobs.
If you do decrease the number of allowances, the government will take a bigger bite out of your check and return that money to you after you file in the form of a refund. To change your withholding, go to your human resources department and ask them to modify your W-4 form. Remember, you might owe Uncle Sam if your employer does not take out enough in taxes.
4: Keep Up With the Tax Code
Trying to keep up with the tax code is like trying to keep up with the Kardashians. It's mind-numbing. The federal government has its own tax code, as does every city, state, county and town that imposes taxes. The federal tax code is the ultimate authority when filing your taxes.
The IRS tries to make it easy to keep abreast of the rules by publishing instructions with your federal income tax forms. Reading and understanding what you can deduct can help you boost your tax refund. In addition, tax prep software is updated every year to make sure it's in line with current IRS guidelines just in case you're not.
3: Hire a Professional Accountant
Knowing the ins and outs of tax preparation can affect whether you get a refund or have to pay. The best thing to do is hire a professional. You can go to a commercial tax preparation company and have them do the math for you, or you can do what I do and hire an accountant who is a tax specialist.
To find one, ask a friend or someone else for a referral. Do it before tax season. Interview candidates. Ask them if they'll take you on, how much they charge, and whether they will figure out the taxes themselves or give it to an underling. Also, ask them whether they will represent you if the IRS knocks on your door. If they say no, go find someone else [source: Huddleson].
2: Deduct Health Insurance Premiums
Are you self-employed? If you answered "yes," then you may be able to deduct medical and dental health care premiums for yourself, your spouse and your dependents, and you don't even have to itemize your deductions to be eligible. Because of the way medical expenses are treated, it will lower your adjusted gross income and thereby reduce your tax payment or increase your refund.
Do note, however, that you can't deduct the premiums when determining your self-employment taxes. Moreover, you can only deduct the premiums for those months that you, or your spouse, did not participate in an employer-subsidized health plan. You also can snag the deduction if you pay health insurance premiums to your employees. Lastly, you're not allowed to claim the deduction if it exceeds the income from your business [source: TurboTax].
1: Don't Forget the Alimony
Alimony. Enough said. You can subtract from your income tax the amount you pay to your former spouse. However, you cannot deduct child support payments; noncash property settlements; payments that represent your spouse's portion of community property; money used to maintain the property or use of the property. Concurrently, you also have to claim the income from alimony [source: IRS].
Author's Note: 10 Tips for Boosting Your Tax Refund
If you don't want to do your taxes, I suggest hiring an expert. They live for this stuff. I remember back in the day when I figured out my taxes all by myself. All I did was use the 1040EZ form and in a few weeks, I had a refund check. These days, I use an accountant. His name is Mike. I give him my expenses, deductions and income, and he prepares my taxes. It's the best $250 I spend each year, except for the one year I owed big time, but that was my fault (he said).
- Bell, Kay. "Earned income tax credit could pay off." Bankrate. (Nov. 12, 2014). http://www.bankrate.com/finance/money-guides/earned-income-tax-credit-could-pay-off-1.aspx
- Federal Bureau of Investigation. "Investigating Tax Refund Fraud." March 18, 2014. (Nov. 12, 2014). http://www.fbi.gov/news/stories/2014/march/investigating-tax-refund-fraud/investigating-tax-refund-fraud
- Hastings, Deborah. "Georgia woman files bogus $94 million tax return, gets arrested." New York Daily News. Sept. 27, 2014. (Nov. 12, 2014) http://www.nydailynews.com/news/national/ga-woman-cash-fake-94-million-tax-return-article-1.1955126
- Huddleston, Cameron. "Five Steps to Hiring a Tax Pro." Kiplinger. January 2014. (Nov. 14, 2014) http://www.kiplinger.com/article/taxes/T056-C000-S001-five-steps-to-hiring-a-tax-pro.html
- Internal Revenue Service. "EITC. Earned Income Tax Credit, Questions and Answers." (Nov. 12, 2014) http://www.irs.gov/Individuals/EITC,-Earned-Income-Tax-Credit,-Questions-and-Answers
- Internal Revenue Service . "Earned Income Tax Credit: Do I Qualify?" (Nov. 12, 2014) http://www.irs.gov/uac/Newsroom/Earned-Income-Tax-Credit-Do-I-Qualify
- Internal Revenue Service. "IRA Contribution Limits." (Nov. 12, 2014) http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits
- Internal Revenue Service. "IRA Deduction Limits." (Nov. 12, 2014) http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits
- Internal Revenue Service. "Roth IRAs." (Nov. 12, 2014) http://www.irs.gov/Retirement-Plans/Roth-IRAs
- Internal Revenue Service. "Topic 452-Alimony Paid. (Nov. 14, 2014) http://www.irs.gov/taxtopics/tc452.html
- Internal Revenue Service. "Topic 501-Should I Itemize." (Nov. 13, 2014) http://www.irs.gov/taxtopics/tc501.html
- TurboTax. "5 Hidden Ways to Boost Your Tax Refund." 2014. (Nov. 12, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/5-Hidden-Ways-to-Boost-Your-Tax-Refund/INF22336.html
- TurboTax. "Deducting health Insurance Premiums if You're Self-Employed. (Nov. 14, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/Deducting-Health-Insurance-Premiums-If-You-re-Self-Employed/INF12128.html
- TurboTax. "Tax Deduction Wisdom—Should You Itemize?" (Nov. 14, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/Tax-Deduction-Wisdom---Should-You-Itemize-/INF12061.html
- TurboTax. "What is a W-4 Form?" (Nov. 14, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Forms/What-is-a-W-4-Form-/INF14815.html
- U.S. Department of Justice. "Alabama Woman Convicted of Stolen Identity Refund Fraud." July 12, 2014. (Nov. 12, 2014) http://www.justice.gov/tax/2014/txdv14747.htm
Many Americans don't think about their tax bills until the new year. But there are things you need to do before Dec. 31 if you want to pay less later.