If you’re a parent, then one of your top priorities is finding ways to save time and money. Perhaps you purchase secondhand clothes, or maybe you opt for toys that can withstand the terrible-twos. Whatever your approach, a few budget-savvy decisions can save you a veritable fortunate while your young ones progress toward adulthood.
One routine that can pad your pockets – and prevent unnecessary stress – is preparing for tax season early. This may be a bit more complicated if you have children, but online services like TaxBuzz can help simplify the process by connecting you with local tax professionals.
Filing taxes can be a yearlong project, but with a little time and effort, you can reap the benefits of having them squared away well before the April 15 deadline. Read on to learn three benefits of preparing your taxes early:
1. No Surprises in April
Incorrect withholding amounts are one of the leading causes of springtime tax debts for families. According to the International Revenue Service, these are some of the groups for whom the standard withholding calculations are most likely to be insufficient:
- Families with multiple children
- Couples who both work
- People with multiple jobs
By taking a few minutes to calculate how much should be withheld every pay period, you can prevent a major headache come tax time.
2. More Deductions
One way to reduce your tax burden is with charitable donations or certain types of home improvements that may be eligible for a deduction. If you can anticipate what your tax burden is going to be for the following year, then you can take advantage of end-of-year gifts or purchases that can reduce it or increase your refund amount. Here are some guidelines to keep in mind when making donations:
- Charities must be recognized by the IRS for donations to be deductible.
- Household products have to be in good condition.
- Donations made or mailed by December 31 count for that year – not the following year.
3. Better Financial Planning
If the kids are headed to college soon, this is a big reason to get taxes out of the way early. The largest federal student aid program, FAFSA, requires your most recent tax return to determine eligibility. The earlier you file, the more accurate your information will be for spring application deadlines. FAFSA isn’t the only reason to get your returns in early, however.
Early Refunds: Since more people tend to file later in the season, there’s less of a delay between filing and refund processing.
401k and IRA Catch-up Contributions: If you haven’t maxed out your 401k or IRA yet, you can make contributions until April 15 of the following year. If you get your taxes filed early, then you can contribute your tax refund toward your retirement savings. If you wait until the deadline to file, you’ll miss the catch-up contribution deadline.
Staying on top of taxes might entail a heavy time commitment or the expense of a professional, but the rewards are well worth the effort: lower stress in an already hectic life – and savings to boot.
This post is brought to you and contributed by Abby Locker.