Setting yourself up for a good tax refund takes some basic tax planning, some research, and a bit of forethought. Going over your tax situation, talking to your partner when completing your W-4s, and capitalizing on many tax credits will help you maximize your tax refund.
Using online tax software will help figure out which tax credits and deductions you can claim to get the largest refund.
Once you begin employment, your employer requests you fill out form W-4. This conveys to your employer the amount of federal income tax to withhold from your salary. The more allowances you apply for on the form, the less income tax is going to be kept back. Then you will have larger paychecks, but a smaller tax refund (or even possibly zero tax refund or a tax charge at year’s end). Things to think about when selecting the amount of allowances you claim include things like:
- Claiming allowances for you alone, your partner and your eligible children and dependents
- Taking an allowance for submitting head of household
- Claiming over $1,500 for child and dependent care charges
- Working multiple jobs
- Having a husband or wife who is employed
Claiming fewer allowances on the W-4 means reduced paychecks, given that more tax is going to be withheld. This raises your odds of over-withholding, which results in a larger tax refund. That’s exactly why it’s known as a “refund:” you are actually being paid back what you overpaid to the IRS in the course of the year.
Caroline Thompson, President of Thompson Accounting and Tax, stated that you should be careful because claiming fewer allowances gives the federal government a year of your money tax-free.
Make use of a W-4 Withholding Calculator to help calculate which allowances to claim.
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Take a look at your filing status
Selecting the filing status that is best suited for your requirements will impact the chance of a rebate. Your filing status establishes:
- Your usual deduction
- Your filing needs
- The credits you will be qualified to be given
- The amount of tax you have to pay or the amount of the tax refund you get
You will find 5 statuses to pick from, however, the 3 most popular are: married submitting together, married submitting individually, single, and head of household. Online tax filing will help you figure out which option is best for your circumstances.
Claim the earned income tax credit
Working families, individuals, those who are business owners as well as others who have a modest to low-level earnings might be eligible for the earned income tax credit. The EITC reduces the amount of income taxes you owe, and you might qualify for a tax rebate. To be eligible, you need to:
Have a legitimate Social Security number
- Be a U.S. resident, a year-long resident alien or a nonresident alien married to a US citizen or resident alien submitting together
- Have earnings from self-employment, from an employer or from providing farm labor
- Not be a claimed dependent or child of someone else
- Have an eligible child and be between the ages of 25 and 65, residing in the U.S. for a minimum of 6 months
Include the dependent care credit
The child and dependent care credit is dependent on a percentage of the sum you paid out for the care of an eligible child or dependent. The overall expenses you possibly can claim are capped at $3,000 for 1 qualified person and $6,000 for 2 or more. If your company provides dependent care benefits, you have to deduct this value. An eligible person is:
- Your son or daughter is under 13 years of old
- A dependent that is physically or psychologically not capable of self-care and who resides with you for over 6 months, or
- Your wife or husband who may not be capable of self-care and resides with you for over 6 months
Additional criteria must be met in order to claim the credit:
- If you’re married, you have to submit a joint return.
- You can’t use a caregiver that is your partner or mother or father of the child, your son or daughter under 19 years old or additional dependents.
- All eligible dependents and children need to have a Social Security number included with your return.
- You have to provide the name, home address, and Social Security number of the caregiver.
The Benefits of Filing Your Taxes Online
We recommend that you file your taxes online as it will make the tax season so much easier. When filing, they will ask you questions regarding your tax situation and will fill out all the correct tax forms for you.
They will let you know which tax deductions and credits apply to you so you can keep the maximum amount of your money. You can even use their free tax refund calculator to see how much money you can expect to get back.