Monday, October 8, 2012
Sure, following direction sounds simple right? But for many people (especially some men I know) it’s not that easy. They’d prefer to just jump into a project without reading the instructions, and doing that with one’s taxes could lead to some major issues.
Knowing our family’s own financial situation also helps me do my own taxes. Again, this might sound like common sense; however, having a good grasp upon things like our overall combined income, investment returns, and possible deductions we might be eligible for such as mortgage interest, student loan interest, child credit, self-employed health insurance premiums, and similar items, makes it easier when tax time comes to gather all such information together and ensure that I have everything ready and prepared before I begin.
Not having to scramble at the last minute to collect all of our tax information and documentation certainly makes things a little easier come tax time. By keeping up with tracking and retaining information related to income (since I’m self-employed), taxes owed, deductions related to charitable donations, business expenses, and similar items, and keeping such information in an easily located and reviewable file, I make my tax life come year’s end, just a little easier to handle.
Keeping Up with Changes to the Tax Code
While I don’t spend hours studying the U.S. tax code each year, I do pay attention when I read about adjustments to certain items that may affect the taxes we pay. For example, the payroll tax reduction has paid off by boosting our income, and it will make a difference in the amount I withhold as a self-employed individual. Also, there was an increase in the Illinois income tax rate from 3 percent to 5 percent this past year, which might not seem like a lot, but it’s a 66 percent increase over the previous year, so it could mean a big bump up in how much we pay.
Having a grasp upon such changes as they occur takes some of the surprise out of tax time when I suddenly realize that certain things may have changed -- either for the better or worse -- compared to last year.
Having a Tax Background
The author is not a licensed financial or tax professional. The information provided in this article is for informational purposes only and does not constitute legal, financial or tax advice. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.