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Maximizing Your Tax Savings: A Strategic Guide to Keeping More of Your Money

Be prepared to get all the details on saving money on your taxes and how overconfidence can come back to haunt you! I have some great content for you this week. Be sure to check it out!

In this post, we are sharing 8 strategies to save more money on taxes.

—Pricelesstay


If you’re like most Americans, you probably have a lot on your mind when it comes to taxes. You know that tax season is a headache and that the amount of money you pay in taxes each year has an impact on every aspect of your financial life. The good news is that if you know what to do (and how to do it), there are ways to save money on your taxes without compromising any essential parts of your financial life. Here’s my list of the top ten ways everyone can save money on their taxes:

If you feel like your paychecks are too small, it’s possible that your employer is withholding too much from your paycheck. You can check this by looking at the Form W-4 on file for you. If the number of allowances claimed on the form does not match up with how many exemptions you actually qualify for, ask your HR department about getting more money back into each paycheck.

If you don’t want to claim any exemptions on your W-4 but still want an extra $50 or so per week in cash every two weeks, then ask them to make sure there isn’t an underpayment occurring as well as overpayment (the two will balance out).

Remember: If they owe me money and I don’t notice until after I’ve filed my taxes this year… well… then I’m going to owe more next year!

You may be able to reduce your taxable income if you itemize. To do so, you must first determine whether you qualify for any deductions.

Deductions are expenses that lower your taxable income and reduce what you owe in taxes. Some common deductions include:

  • Charitable contributions
  • Medical bills and related expenses
  • Mortgage interest paid (on qualified homes)

If you’re going to file your taxes on time, it’s important to know what happens if you file late. If you miss the deadline, it could cost you—the IRS charges a penalty for filing a return late (with exceptions). The penalty is 0.5% per month or partial month that your return is late. For example, if your return is 30 days late, that’s equal to 15% in penalties!

An Offer in Compromise (OIC) is an agreement between the taxpayer and the IRS to settle by paying less than what you owe. It lets you pay less than the full amount of tax due, which can help if you can’t afford to pay all at once.

To apply for an OIC, fill out Tax Form 656-B: Offer in Compromise Booklet and send it along with copies of financial documents such as bank statements, pay stubs or other information showing your income level.

If your offer is accepted, you’ll get a reduced payment plan tailored to how much money you have available each month and how much debt you have on credit cards or student loans—the IRS doesn’t want their taxpayers drowning themselves in debt from trying to pay taxes off too quickly! You may also be able to avoid penalties and interest charges when submitting this type of payment plan over time instead of immediately coming up with all that money upfront at once.

Another way to keep your business and personal finances separate is to open a separate bank account for your business expenses. This way, you can ensure that these expenses are only paid with money from this account and not from any other funds in your name.

  • Use the separate account for business expenses: You should only use money in the special bank account for paying for business-related costs, such as office supplies or advertising materials.
  • Keep records: You should keep accurate records of how much money was spent on each purchase so that when tax time comes around, you don’t have any problems reporting how much was used from this special account and what it was spent on.

The IRS recommends that all businesses maintain detailed records of their transactions for at least three years after filing taxes (the typical statute of limitations period). These records can help protect companies if there is ever an audit or chargeback dispute because they provide evidence against false claims by customers who say they never received goods or services purchased through credit card transactions online; however, it’s important not just because of potential legal issues with auditors but also because knowing exactly where all the cash went during each month’s operations helps prevent mistakes like those mentioned earlier–i.e., accidentally spending more money than intended!

One of the best ways to save money on taxes is to claim all your deductible expenses, including mileage. Keep track of every time you drive for business, and make sure you’re claiming the total amount. If it’s a short trip, don’t forget that gas and parking expenses are also deductible.

Keeping a log means saving time during tax season because you know exactly how much mileage was used for business purposes. You can also use this log as proof if an audit occurs or if there’s ever any question about whether something qualifies as a deductible expense or not.

The IRS allows you two different methods for deducting personal vehicle use: actual expenses or standard mileage rate (SDR). The SDR is cheaper than keeping track of actual costs, but still requires some recordkeeping! You’ll need to keep a log in order to claim it—however, this method works best when there’s little variation between what would be considered “normal” driving habits versus those related specifically towards work-related activities throughout most months out of the year (and even then it only saves 11% over tracking everything manually).

If you’re employed, chances are that your employer offers a 401(k) plan. A 401(k) is an employee-sponsored type of retirement savings plan that allows you to set aside some of your income tax-free. You may also be eligible for an IRA (individual retirement account), which allows anyone with earned income who meets certain eligibility requirements to contribute up to $5,500 per year in 2019 or $6,000 if you’re age 50 or older. If your employer doesn’t offer a 401(k), it could be worthwhile to look at other types of plans, such as the Roth IRA or SEP IRA.

You’ll want to choose a provider carefully because there are many different investment options available in different plans, and most have fees attached that can dramatically affect your growth over time. Also, keep in mind that there are limits on how much money can be contributed each year—for example, the maximum annual contribution limit for traditional IRAs will be $6,000 this year ($7,000 if over age 50).

You can save money on taxes if you know what you’re doing!

Taxes are complicated, but if you know how to file your returns correctly and take advantage of the various deductions available to you, then it’s possible to pay less money than usual. If your income is low enough, there may even be a way for you to get some of that money back from the government in the form of a refund check at tax time:

  • File your returns by April 15th! Not filing on time will lead to penalties and interest charges.
  • Know what deductions apply to your situation. Some common ones include mortgage interest payments; charitable contributions; education costs related to job skills improvement; moving expenses incurred while relocating for work purposes; child care expenses incurred while working full-time or part-time outside of home; medical/dental expenses exceeding 10% of adjusted gross income (AGI), etc. These can really add up over time!

The only thing worse than losing money in the stock market is losing money because you’re overconfident. And this is a problem that many investors face. Overconfidence, or the feeling that you know more than other investors, can lead to taking on a risk without fully understanding its consequences—which can be costly down the line. This goes for individual investors and institutions like mutual funds; overconfident people tend to have higher returns but suffer more significant losses than their less-confident counterparts. So how do we fight back against overconfidence? There’s no quick fix here; it’s just something we all need to remember when we think about our finances and how they relate to investments.

It occurs when people are too sure they’re right and don’t recognize the possibility of being wrong. Overconfidence also leads to overconfidence, which can lead to even more overconfidence—which is why it’s called a “cognitive bias.”

It’s pretty standard for people to suffer from this faulty thinking; you might have even noticed yourself doing it before! Most people do—it’s an innate human tendency that psychologists have studied for decades.

Overconfidence is the belief that you know more than you really do. And it can hurt you in a lot of ways. Overconfident investors make bad decisions, which can lead to loss of capital and poor long-term performance.

Overconfidence is also common among institutional investors, whose decisions affect not only their own portfolios but also those of individual investors who follow them. For instance, mutual funds and exchange-traded funds (ETFs) must report their holdings at least quarterly to the Securities and Exchange Commission (SEC). These disclosures are public information and can be used by anyone who wants to get a sense of how well-diversified their holdings are or how concentrated they are in certain positions—and whether they might be overvalued because they’re overweighted in one sector or another.

But what if an institution chooses not to disclose its full portfolio? What if it just discloses its top 10 stocks? Or 20? Or 50? If there is no transparency about what positions institutions hold in their portfolios, then individuals have no way of knowing whether these large investors are making good decisions or bad ones regarding stocks held by other people’s retirement accounts or 401(k) plans.”

Overconfidence can lead to risky behavior, which is one of the reasons why it’s dangerous. Here are some of the ways overconfidence increases risk:

  • Not heeding warnings
  • Ignoring advice
  • Ignoring facts, evidence, and data
  • Failing to seek out independent sources of information

There’s no quick fix for overconfidence—it’s a learned behavior. If you find yourself feeling too confident about your abilities as an investor, step back and take some time to think about how your decisions affect your portfolio performance before moving forward with confidence (or lack thereof).

It’s important to be confident in your investing skills, but it’s also good to remember that overconfidence can lead to a whole host of problems. Overconfidence can lead you to take on more risk than is necessary, ignore warnings and not seek help when you need it, and make bad decisions. It’s also important to remember that just because something worked well for someone else doesn’t mean it will work as well for you.


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Filing Taxes for the First Time? Here’s Everything You Need To Know

Are you in a bind because you’ve never filed a tax return before? And to top it off, you just learned that you’ll need to file one this year? April 15th:

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filing your taxes
Are you in a bind because you’ve never filed a tax return before? And to top it off, you just learned that you’ll need to file one this year?
 
April 15th: Tax Day always falls on that date, unless April 15 falls on a weekend or holiday. 
 
If you are filing your taxes for the first time, we have everything you need to know. And yes, we will be sharing how to file your taxes for free (or at a super low cost).

In this post, we are sharing everything you need to know if you are filing taxes for the first time.

A BEGINNERS GUIDE TO FILING TAXES

Essential tips for all you first-time filers out there ⬇️

Figure Out If You Have to File a Tax Return

To determine if you need to file a tax return, there are a few key factors to consider. 
 
In general, if your gross income in 2023 was at least $13,850, you’ll likely need to file a tax return in 2024.
 
Keep in mind that different rules apply to married individuals, older Americans, and heads of household. 
 
It’s important to note that even if you can be claimed as a dependent on someone else’s tax return, the $13,850 threshold still applies to you. 
 
If you are considered a dependent, you must file a return if you have accumulated at least $1,250 in “unearned” income, such as interest from investments.

Get Your Documents Together Early

 
Once you’ve determined that you need to file a tax return, it’s time to gather the necessary documents to complete it.
 
Here’s a list of essential documents to gather:
 
W-2: If you have a job, your employer is required to send you this form by the end of January. It provides details on your earnings for the previous year and the amount of tax withheld.
 
1099s: These forms report income that doesn’t come directly from a traditional employer. They include earnings from freelance work, “gig” pay, interest and dividend income, as well as income from third-party platforms like Venmo and PayPal.
 
Receipts: As a first-time taxpayer, it’s important to start keeping records of transactions that may need to be reported on your tax form. This includes income, expenses, and potential deductions. For example, keep track of any charitable donations you make or significant medical bills you incur.
 
By gathering these essential documents, you’ll be well-prepared to complete your tax return accurately and efficiently.

Gather Important Personal information

You’ll need the following personal information on hand to file taxes:
 
  • Social Security Number (SSN) or Taxpayer Identification Number
  • (TIN) for yourself and any dependents
  • Full name and date of birth for all individuals on your return.
  • Proof of identity with a valid photo ID
  • Bank account information, including your routing and account numbers, if you want to receive your tax refund via direct deposit.

Figure Out If Someone Can Claim You as a Dependent

 
It’s important to determine whether someone can claim you as a dependent, especially if you’re living with your parents or receiving any financial support from them.
 
According to TurboTax, parents can claim you as a dependent if you’re under 19 years of age, or under 24 and a full-time student, and they provide more than half of your financial support.
 
While parents can receive tax benefits by claiming you as a dependent, it’s also crucial for you to report this dependent status on your own tax return. 
 
Be sure to check with your parents and discuss whether they plan to claim you as a dependent and how it may affect your taxes. Always stay informed to ensure that you’re taking all the necessary steps towards financial success.

Figure Out If Someone Can Claim You as a Dependent

 
It’s important to determine whether someone can claim you as a dependent, especially if you’re living with your parents or receiving any financial support from them.
 
According to TurboTax, parents can claim you as a dependent if you’re under 19 years of age, or under 24 and a full-time student, and they provide more than half of your financial support.
 
While parents can receive tax benefits by claiming you as a dependent, it’s also crucial for you to report this dependent status on your own tax return. 
 
Be sure to check with your parents and discuss whether they plan to claim you as a dependent and how it may affect your taxes. Always stay informed to ensure that you’re taking all the necessary steps towards financial success.

Determine Your Tax Filing Status:

Here are the five primary filing statuses: 
 
  • Single: If you’re unmarried.  
  • Married (filing jointly): For married couples who want to combine their income on one return.
  • Married (filing separately): For married couples filing separately.
  • Head of household: For unmarried individuals who support dependents.
  • Qualifying widow/widower with dependent child: If you’re a surviving spouse with a dependent child. 
 
Include the appropriate filing status on your forms, when filing your taxes for the first time.

Find Out If You Qualify for Deductions or Credits

 
When it comes to taxes, deductions and credits can both help decrease your overall tax liability. Tax deductions work by reducing the amount of your income that is taxable while tax credits decrease the amount of tax you owe.
 
For first-time taxpayers, there are a few common deductions and credits that may apply:
 
  • The student loan interest deduction is one example of a deduction and can possibly result in a maximum deduction of $2,500 for the interest paid on student loans.
 
  • The American Opportunity Tax Credit is a credit that can be claimed by those individuals for whom no one can claim as a dependent, allowing for up to $2,500 credit for college expenses.
 
  • The Earned Income Tax Credit may be an option for individuals who earned a low income in 2023. It is essential to consult the IRS tables for information on how to qualify for this credit based on your income level.
 
  • Lifetime Learning Credit: A credit that helps cover the costs of post-secondary education, including tuition and related expenses, for eligible students. 
 
  • Educational expenses deduction: This deduction covers certain educational expenses. 
 
  • Home Energy Tax Credits: A credit for homeowners who make qualifying energy-efficient home upgrades.
 
  • Energy Efficient Home Improvement Credit: A credit for homeowners investing in energy-efficient home improvements. 
Deductions and credits can be a valuable tool when it comes to claiming your taxes.
 
Getting your taxable amount to the lowest possible is important if you want to pay less in taxes. It’s crucial to research which ones may apply to your situation and take advantage of them while preparing your tax return.

Decide if You Need Help

If you’re a first-time taxpayer, you have the option of either doing your own taxes or hiring a professional. 
 
Many Gen-Z individuals choose to do their own taxes, which is generally fine if your tax situation is straightforward.
 
By taking the DIY approach, you can potentially save money and complete your tax return quickly using tax software or the official IRS Free File program.
 
 Calculate your estimated Tax Return using Turbo Tax.

Completing Your Tax Filing

 
Once you’re prepared to file your taxes, it’s important to ensure the accuracy of your tax return. Take the time to review your personal information, income, deductions, and credits for any errors or omissions.
 
Online Filing: If you choose to file online, the platform you use will typically guide you through the process. Before proceeding from one page to the next, carefully verify the information provided for an easier filing experience.
 
 
Tax Professional Assistance: When working with a tax professional, they are responsible for reviewing their work. However, it’s crucial to provide them with accurate information from the start. If needed, ask for a walkthrough of your return to gain additional peace of mind.
 
Nonprofit Organization Assistance: If you’re seeking help from a nonprofit organization, you might be required to attend in-person sessions and bring all necessary documents. The organization will then assist you in submitting your tax return.
 
Paper Filing: If you opt for paper filing, complete all mandatory forms accurately, attach supporting documents, and send the package to the appropriate IRS address. Take the time to double-check everything before mailing your return, and remember to include a signed and dated copy.
 
It’s crucial to file your return by the tax deadline to avoid any late penalties. For the 2024 tax year, the deadline is April 15, 2024.

Pay the IRS if you owe taxes

After filing your taxes, you’ll either receive a tax refund or a notice of the amount you owe to the IRS. If you end up owing money, you’ll need to know how to pay what you owe.
 
You have a few options:
 
  • Use IRS Direct Pay: This online service lets you pay your tax bill directly from your bank account. It’s a secure and convenient way to pay the IRS without any fees. 
  • Pay with a credit or debit card: You can pay your taxes using a credit or debit card through authorized payment processors, but this method includes fees. 
  • Pay in installments: If you can’t pay your tax bill in full, you may be eligible for an installment payment plan with the IRS. This allows you to pay your tax debt over time in manageable installments. 
Whichever method you choose, pay what you owe on time to avoid any penalties.

Common Tax Mistakes to Avoid For First-Time Filers

  • Misreporting any earned income
  • Not claiming qualified deductions or credits
  • Forgetting to sign and date your Tax return
  • Missing the date to file
  • Not keeping organized and accurate records.
  • Inaccurate Filing Status

This post was all about, everything you need to know before filing your taxes for the first time.

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