Dont Get Caught Up In Spending
Before tax season even starts, try to avoid sales and other temptations that could make you want to spend your money. Many companies know that people get big returns during that time of the year and the email marketing efforts they do are close to or more than what they do during the holidays. These companies want you to spend your money on their products or services. Avoid the temptation! In fact, try unsubscribing to marketing emails before they have a chance to target you!
Maximize Your Tax Refund
For many of us, a windfall in the form of a tax refund is coming our way. According to the IRS, the average refund in 2017 was $2,895thats enough money to really make a difference in your financial outlook.
If youre expecting a tax refund this year, dont splurge on an impulse buy! Use the money to work towards some of your financial goals. Here are a few ideas on how you can use your tax refund in productive, proactive ways.
Build a rainy day fund: Bankrate.com suggests establishing an emergency fund between $1000-5000 to cover unforeseen events like home or car repairs. Having an emergency fund means you wont have to rely on credit cards when unexpected expenses inevitably arise. Open up a savings account and earmark part or all of your refund as an initial deposit. You can then set up direct deposits and watch the balance grow over time. Setting aside just $20 a week for a year will add over $1000 to your rainy day fund.
Pay off debt: One of the most productive things you can do is use your refund to tackle some of your outstanding debt. If you have multiple debts you would like to finally pay off, consider applying all or some of your refund to those with the highest interest rates. For example, your credit card probably has a higher interest rate than your car loan. By paying down credit card debt, you could also improve your credit score, which has benefits that ripple out across your finances.
Ways To Get A Bigger Tax Return
While we all have to pay taxes, there are various deductions and tax credits available to help you maximize your tax refund. We compiled a list of seven useful tips to help you get a bigger refund, boost your disposable income, and start saving more money for the things that matter most.
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Retirement Plan Tax Deductions
Taxpayers can park up to $18,500 into a company-sponsored and self-employed 401 plans — that’s money that the federal government can’t touch, tax-wise. Americans age 50 and over can tack on an additional $6,000 in 401 funds. Deductions on individual retirement accounts are available, too, depending on your income status and the amount of cash a spouse has stashed away in a 401 plan. The IRA contribution limit for 2019 is $6,000, or $7,000 for those age 50 and older.
Amend Prior Tax Returns
Did you know you can amend tax returns up to 10 years back to trigger a refund from a prior year? Perhaps youve missed tax credits or deductions from prior years its easy to do, and Im sure most of us have made simple mistakes on our tax return.
The good news is that you can easily adjust your tax return by completing a form called T1-ADJ . Note that you may be able to make changes online with the Change my return service available in CRAs My Account. Make sure youre amending a prior return and not filing a second tax return for that year.
Here are a few other commonly missed tax deductions and credits that can put more money back into your wallet:
- Brokerage fees. Fees paid for stocks that were bought or sold in your non-registered account in the past 10 years can be deducted on your tax return. Better yet, open an account with Questrade and dont pay any fees for ETF purchases.
- Capital losses. If you sold shares in a stock or ETF for less than the price you paid, you should record the capital loss for that year even if there are no capital gains in the same year to offset it. Thats because a capital loss can be carried forward to future years and eventually be used to offset any capital gains in the future.
- Disability amount If you have a child born with a severe disability you can get a credit for the disability amount. You must get your doctor to fill out a certificate confirming the diagnosis.
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Use Online Tax Software
These days, you can DIY your own tax return and save a bundle on tax filing fees. Online tax software, like TurboTax, makes it easy: you can instantly import tax information from the Canada Revenue Agency with Auto-Fill My Return. The software includes a complete list of tax deductions to make it easy for customers to find the deductions that apply to them.
Once your information is entered, a review section offers suggestions on credits and deductions that may apply to your situation, as well as ones that definitely apply. The software then guides you back through your tax return and helps apply the recommendation.
The bottom line? TurboTax offers a cheap and easy way to file your taxes and get the most out of your tax return. Whether youve got a straightforward tax return or a complicated one involving business income and expenses, TurboTax has software suited to your needs at an affordable price. In particular, TurboTax Self-Employed is the only software in Canada that is designed specifically for people with self-employed income and provides expert guidance specific to these individuals. If youve got questions, TurboTax Free customers can upgrade to a paid option that includes full guidance, interview-based profiling, and other features.
How Does The Government Pay Tax Refunds
There are two ways you can receive a refund:
For those who don’t have access to banking services, a paper refund check is the only viable option — even though it can take a bit longer.
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Ways To Maximize Your Tax Refund
Do the words “tax return” send shivers down your spine because you always end up with a gigantic headache and little or no tax refund at the end? Maybe the problem is in preparation and planning or lack of it. Tax law is complicated, and it takes a coordinated, sustained effort to optimize your refund. Let these nine tips help you acquire the best refund possible.
1. Don’t Delay The IRS doesn’t start processing forms for the 2020 tax year until February 12, 2021, but that doesn’t mean you have to wait until right before this year’s deadline of April 15. If you need motivation, think of what you can do with a tax refund windfall. The sooner you file, the sooner you can put your refund to use. Two other reasons to avoid procrastination: the earlier you begin, the more time you’ll have to locate any missing documents and data and the sooner you file, the harder it is for a tax identity thief to target you.
2. Contribute to Retirement Plans Retirement plans allow you to build a tax-deferred nest egg while lowering your taxable income for the year. Max out your 401 and traditional IRA contributions if you can. The limits for a 401 are $19,500 for tax year 2020 and 2021, plus an extra $6,500 catch-up contribution if you are over 50. IRA limits for both 2020 and 2021 are $6,000 with a $1,000 catch-up contribution.
Maximize Your Tax Credits
Tax credits are different than tax deductions and come in two flavours: refundable and non-refundable.
- A non-refundable tax credit is applied directly against your tax payable. That means if you have tax owing of $500 and get a tax credit of $100, you now only owe $400. If you dont owe any tax, non-refundable credits are of no benefit.
- A refundable tax credit, such as the GST/HST credit, means you will receive the credit even if you have no tax owing.
Here are the best ways to take advantage of tax credits:
- Basic Personal Amount: Every Canadian resident is entitled to claim the basic personal amount on his or her tax return. For 2019, the basic personal amount is $12,069. What this means is that instead of paying taxes on your entire income, youll just be taxed on the remaining income once the basic personal amount has been applied. In other words, think of it as your first $12,069 worth of income being considered tax-free or tax-exempt.
- Spousal Amount: If you support your spouse or common-law partner, and their net income is less than $12,069, you can claim all or a portion of the spousal amount . The amount is reduced by any net income earned by the spouse. The spousal amount can only be claimed by one person for the spouse or common-law partner.
Other Eligible Tax Credits:
- , and exam fees
- Medical expenses
- Donations or political contributions
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What To Claim If You Work From Home
If you can wear ugg boots to work, you probably work from home either full or part time. If this applies to you, it’s worth noting that a portion of your home-running expenses may be claimed as a tax deduction. The expenses that you may be able to claim include the work-related portion of:
- heating, cooling and lighting of the home office room
- computer consumables, stationery, telephone and internet costs
Getting Your Fair Share With These 10 Tax Breaks
The good news is that there are new tax breaks that should — or could — incentivize Americans to save more money on their tax returns.
So, why leave money on the table that the IRS can shovel into its pockets?
Don’t do it – use these money saving tips to financially maximize your 2019 tax return experience that’s due in 2020, and don’t be the taxpayer who overpays the federal government every April when they didn’t have to.
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Use Tax Software Or Work With A Tax Preparer
Again, it can be nearly impossible for an individual to successfully navigate all of their options in tax refunds and credits. To make your experience easier, you should consider working with a professional or filing software. This way, you will be able to very quickly evaluate whether or not you are eligible for credits or breaks based on such factors as:
- Driving a fuel-efficient vehicle.
- Driving or traveling for work.
- Taking care of children or dependents, adopting a child, or taking care of someone with special needs.
- Making charitable contributions.
Engaging A Registered Tax Agent
If you do want to use a registered tax agent to prepare and lodge your tax return, its important to note you will pay a fee for their service, but itll typically be deductible next financial year.
Note, you should make sure your tax agent is registered with the Tax Practitioners Board .You can find a registered tax agent or check whether a person is registered, by visiting the TPB website.
If your finances are more complex, using a tax agent may provide you with peace of mind, as it could save you time, highlight deductions you didnt know about, while making sure all your claims are legitimate.
On top of that, most registered tax agents have a special lodgement program, which means they can often lodge returns for their clients after the usual 31 October deadline, but youll need to contact them beforehand.
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Filing Returns For Your Taxes Choosing The Right Accountant
When you want to maximize tax refund, its important to make sure your annual tax return is clear, accurate and precise. You also want to ensure that your return is personalized and completed by a knowledgeable preparer.
There are several options when planning to file your taxes: You could use tax software, go to an accountant or connect with an online accountant. Tax software is often programmed to ask you questions to highlight potential credit or deduction eligibility, while accountants are known for their vast knowledge and tax planning options.
After you file your taxes, you can check with the IRS to see if your refundhas been issued.
An online accountant at Picnic Tax can offer the best of both worlds, however. Youll have all the ease and comfort of online tax preparation as well as the personal touch and planning advice of a skilled accountant. When you ask, How to maximize my tax refund? you can find a qualified online accountant at Picnic Tax with the answers for you. We also offer clear pricing and a quick turnaround time. Find out more about how we can ensure you get the biggest tax refund you can.
Choosing Your Filing Status
One of the best ways to maximize tax refund is to consideryour filing status. Around 96% of married couples file joint returns, but somemay want to consider opting for status. By choosing to file separately, each partner may have alower adjusted gross income, used to determine eligibility for some credits.Individual accounting could also boost eligibility for medical credits if onespouse needs significant care. The Child Tax Credit is also available tospouses who file separately.
However, other deductions are designed to be available onlyto taxpayers who file as Married Filing Jointly. You should take your owneligibility into account when deciding which option is best for you.
Single taxpayers also have options, especially if they carefor a dependent, whether a child or an elderly parent. By filing as a Head ofHousehold, you can access a larger standard deduction and more advantageous taxbrackets.
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Financial Moves To Help Maximize Your Tax Refund This Year
As the temperatures begin to cool and we try to figure out what this yearâs holiday season will look like, itâs a good time to start thinking about other year-end rituals as well. When it comes to your money, the end of the year is a good time to start thinking about how to position yourself to make sure youâre not paying more taxes than you should.
So before we bid adieu to 2020, here are five steps you can take now to maximize your tax refund this year.
What About Stimulus Checks And Covid
The U.S. government issued two stimulus checks in 2020. The first round was for $1,200 and the second round was for $600. Neither of these checks are considered taxable, nor do they impact your tax status. They also issued a $1,400 check in 2021, but that won’t have an impact on your taxes in 2020 or 2021.
In addition, you could qualify for a Recovery Rebate Credit if you didn’t receive the full amount of the stimulus check.
Who Needs to File a Tax Return for 2020?
Believe it or not, there are some people who are not required to file a federal tax return. In general, individuals or households that don’t meet certain income thresholds are exempt from filing. The limit varies depending on factors including age and filing status.
For 2020, you will need to file a federal tax return if the income on your W-2 meets or exceeds the following limits:
- Single and under 65 years of age: $12,400
- Single and 65 or older: $13,700
- Head of household and under 65 years of age: $18,650
- Head of household and 65 or older: $19,950
- Qualifying widow with dependent children and under 65 years of age: $24,800
- Qualifying widow with dependent children and 65 or older: $26,100
What if you’re self-employed? No matter your age or marital status, you must file if you are self-employed and earned $400 or more during the tax year.
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Hidden Ways To Boost Your Tax Refund
Here are five tried-and-true ways to reduce your tax liability at tax time. Pay no more than you owe, or even increase your tax refund.
For information on the third coronavirus relief package, please visit our American Rescue Plan: What Does it Mean for You and a Third Stimulus Check blog post.
While Americans may disagree on how the government spends their taxes, at tax time, many of us are looking for ways to pay no more than we owe or even boost our tax refunds. These strategies go beyond the obvious to give you tried-and-true ways to reduce your tax liability.
Make The Most Out Of The Tax Benefits Made Possible By Coronavirus Relief Measures
If the events of 2020 affected you, there may be tax repercussions, and you may be eligible for tax relief under any of the coronavirus compensation packages passed in 2020.
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, as well as the Coronavirus Response and Relief Supplemental Appropriations Act, delivered a slew of policy reforms, including increased jobless benefits andstimulus payments.
Under the relief packages, stimulus payments are not taxable, and if you did not take the maximum stimulus payout, you may be able to claim extra as a recovery rebate credit when you submit your taxes.
The recovery rebate credit might boost your tax refund or minimize your out-of-pocket expenses.
If you are self-employed and are ill, confined, or caring for a member of the family, the Families First Coronavirus Response Act may allow you to collect new tax credits under the Families First Coronavirus Response Act.
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