11 ways to reduce next year’s tax bill

Published: Tuesday, April 04, 2017 @ 4:44 PM

SAN FRANCISCO, CA - APRIL 14:  Liberty Tax Service tax preparer Ronn Seely works on tax returns on April 14, 2011 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)
Justin Sullivan/Getty Images
SAN FRANCISCO, CA - APRIL 14: Liberty Tax Service tax preparer Ronn Seely works on tax returns on April 14, 2011 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)(Justin Sullivan/Getty Images)

If you claimed the right number of dependents and standard deductions on your 2016 federal income tax return and you still ended up owing the IRS, you’re probably looking to avoid a repeat performance next year. Luckily, there are several ways to increase your chance for a refund (or at least reduce the amount you’ll owe) and you don’t have to be a tax whiz or accountant to take advantage.

Here are 11 ways you can pay less in federal taxes for your income return next year.

1. Contribute to a 401K or IRA

Contributing to a retirement fund is an important way to ensure financial independence in your golden years, but it can also convey short-term tax benefits. In most cases, the contributions you make to your 401K and IRA plans are tax-deductible and are not included in your taxable income at the end of the year. (Note: If you didn’t contribute to an IRA in 2016, you still have time. You have until April 18 to contribute up to the maximum amount and shave off a good chunk of your tax bill. Filed your taxes already? That’s OK. You can file an amended return to reflect the contribution.)

2. Buy a Home

There’s a distinct tax benefit to home ownership. The interest you pay on your mortgage is tax-deductible, and the interest is front-loaded. For the first several years, most of your mortgage payment goes toward interest, which will drastically reduce your adjusted gross income at tax time. Want an extra boost for your taxes next year? Consider paying January 2018’s mortgage payment in December to get a tax benefit before the end of the year.

3. Donate to Charity or Volunteer

You probably know charitable donations can be itemized and deducted from your income, so you’ll want to save receipts anytime you donate cash or items to charity. You can even deduct miles you travel for volunteering or other charity work.

“Miles you travel on behalf of a charity are deductible at 14 cents per mile for 2017,” said Gail Rosen, CPA.

4. Start a Home Business

Starting a home business can provide you with a new source of income and allow you to take deductions off any income the business generates.

These deductions include business costs you incur throughout the year, a portion of your mortgage and utilities if you use a home office and the cost of goods needed to keep your business running. You can even deduct startup costs.

“Any expenses that are incurred before the first sale are ‘start-up costs,’” Rosen said. “These costs cannot be deducted until the first sale. Then they are deducted over 15 years and you can deduct the first $5,000 in the first year.”

5. Search for a New Job

If you hunt for a new job in your field this year, you can write off some qualifying expenses as you search. There are exceptions, but potential write-offs include things like clothes or travel.

“If you looked for a new job in 2017, you should be aware of the income tax deduction that may be available with respect to job-search costs,” Rosen said. “Qualifying expenses are deductible even if they do not result in a new job being offered or accepted.”

6. Open a Flexible Spending Plan

Many employers offer flexible spending plans that let you contribute toward yearly medical expenses pre-tax. These contributions typically don’t count toward your taxable income.

7. Deduct Medical or Dental Expenses

Many medical and dental expenses are tax-deductible. According to Rosen, the cost of getting to and from medical treatment is deductible at 17 cents per mile, plus the cost of tolls and parking, and dependent expenses are also deductible.

“If you cover the medical cost of dependents, these can be deducted. Additionally, if you are covering the costs of an individual who would qualify as your dependent except that they have too much gross income — for example, an elderly parent — you may be able to deduct these costs as well,” said Rosen.

8. Education-Related Expenses

Current and former students have many eligible deductions and credits related to their education expenses. Paid student loan interest and tuition and fees can be claimed as deductions. Eligible current students can also access the American Opportunity Credit, which can cover up to $2,500 annually for four years, and the Lifetime Learning Credit, which can cover up to $2,000 per tax return.

9. Install Solar Energy

Homeowners who install solar energy systems in their home can get back tax credits at up to 30% of the cost of installation. This credit will begin to decrease after 2019 so you may want to act soon if you’re planning on installing solar panels.

As an added bonus, solar energy can significantly reduce your energy bills.

10. Hunt Down Every Available Tax Credit

We’ve named several tax credits above, but there are more, including credits for adopting children, the cost of child care and low-income households. Tax credits are more valuable than deductions, as they reduce your taxable income on a dollar-for-dollar basis, so make sure you’re taking advantage of every option.

11. Get a Pro to Do Your Taxes

No matter how much research you do, a professional may be able to identify tax deductions and credits that hadn’t occurred to you. Paying a reputable professional you trust can help you stay organized and minimize your tax liability. Here’s a handy guide to finding the right tax professional for your needs.

Forgotten lottery ticket worth $24 million found days before deadline

Published: Thursday, May 25, 2017 @ 3:11 PM

A lottery player’s luck almost ran out this week after a ticket worth more than $24 million was nearly forgotten in their home.

An anonymous individual with a Lotto ticket came forward to claim the winnings two days before their ticket was set to expire.

News coverage of the unclaimed Lottery prize escalated in the days leading up the deadline, causing the individual to check their house, where they discovered the winning ticket in a pile of other old tickets, the New York Lottery said.

The individual went to a lottery office in Lower Manhattan on Tuesday. The ticket was set to expire Thursday.

>> Read more trending news

Lottery rules allow winners to claim their prize up to a year after a drawing.

“We are thrilled that this lucky winner was able to locate this life-changing ticket,” said Gweneth Dean, director of the Commission’s Division of the Lottery. “We look forward to introducing this multimillionaire who came forward in the nick of time.”

The New York Lottery said they will reveal the identity of the winner after a security background check review.

The winning numbers were 05-12-13-22-25-35 and the bonus number was 51.

6 tax mistakes procrastinators make and how to avoid them

Published: Tuesday, April 04, 2017 @ 3:29 PM

NEW YORK, NY - APRIL 15:  A sign states business hours in the James A. Farley post office in Manhattan on that last day to file taxes on April 15, 2014 in New York City.(Photo by Spencer Platt/Getty Images)
Spencer Platt/Getty Images
NEW YORK, NY - APRIL 15: A sign states business hours in the James A. Farley post office in Manhattan on that last day to file taxes on April 15, 2014 in New York City.(Photo by Spencer Platt/Getty Images)(Spencer Platt/Getty Images)

We get it. Doing your taxes is no fun, especially if you know you’re going to owe money. But as with any project on which you procrastinate, leaving everything to the last minute can lead to errors, both large and small, and some of those errors could cost you serious money.

If you’ve gone and done it, though, and are still looking at that pile of tax forms over there in the corner, we’ve compiled a list of six quick-and-dirty tips that could keep you from making some obvious, and not-so-obvious, mistakes when you finally sit down and tackle the task. They could also help you maximize your tax refund.

1. You Forgot to Sign It

You might wonder how anyone could forget to sign their tax form, but this simple process is one of the most common tax mistakes, according to the IRS. Just like forgetting to sign a check or a contract, it means your return isn’t valid. Usually, there isn’t a penalty or interest associated with this error (since you’ve already included a check or electronic payment if you owed), so the IRS will just send a notice asking for a valid signature, but it will delay the processing of your return. If you’re getting a refund, that too will be delayed.

So check, double-check — heck, triple-check — that you signed or completed the e-signature process before filing your return. Also, check out these last-minute filing tips from the IRS.

2. You Miscarried the 9

Math errors are also a very common mistake made by folks in a hurry. Fortunately for most people, the IRS corrects any miscalculations, so there’s no need for filing an amended return. But these mistakes can mean the difference between you thinking you’re getting a refund and the reality that you actually owe taxes, so be sure to check your calculations carefully.

One way to help you avoid math errors is to file electronically so the calculations are done for you. Bye-bye, No. 2 pencil! So long, calculator!

3. You Didn’t Account for All Your Income

Did you have a side hustle early last year? A freelance design gig for a friend’s business? If so, you’re going to need to account for it, regardless of whether you received a W-2 or 1099 from whomever paid you. That’s because, while there’s an IRS threshold for filing these documents by employers, there’s no similar threshold for claiming the income. Income is income is income. If you made money and don’t report it — and the IRS catches it — it’s going to cost you penalties and interest at best, and open you to a possible audit at worst.

4. You Forgot Deductions or Tax Credit

It’s easy to forget these things when you’re in a hurry, but they can end up saving you some serious money and are well worth the extra time to figure out if you qualify. So if you’re just claiming the standard deductions because you’re under the gun, you might want to take a deep breath and check out TurboTax’s list of 10 commonly overlooked tax deductions that can keep you from overpaying the tax man.

5. You Filed for an Extension but Didn’t Understand the Rules

Filing for an extension is a great idea if you’re down to the wire and don’t really understand your tax situation. But remember that an extension gives you an extra six months to file your paperwork, but not an extra six months to pay any taxes due. So, if you’re confused, tax pros recommend doing a quick calculation of your taxes, filing for your extension and making any required payment of taxes you think you owe. This will help you avoid penalties and interest once you get your final calculations together.

6. You Didn’t Bother to Request an Extension

You gave up. You shoved, slammed and jammed your return through and now it’s full of mistakes that are going to cost you money by way of penalties or because you’ve left money on the table. It’s a much better idea to file the extension, then get the help you need from a tax professional to ensure you’re not overpaying your taxes.

Whatever you do, make sure you file your taxes. Unpaid taxes can have serious consequences on your personal finances, including your credit scores if they go unpaid long enough.

The ultimate beginner’s guide for filing your taxes

Published: Tuesday, April 04, 2017 @ 2:23 PM

The top of a form 1040 individual income tax return for 2005 is seen atop a stack on the same at the Des Plaines Public Library March 23, 2006 in Des Plaines, Illinois. (Photo by Tim Boyle/Getty Images)
Tim Boyle/Getty Images
The top of a form 1040 individual income tax return for 2005 is seen atop a stack on the same at the Des Plaines Public Library March 23, 2006 in Des Plaines, Illinois. (Photo by Tim Boyle/Getty Images)(Tim Boyle/Getty Images)

When I was living on my own and working my first job, I decided to do my taxes myself.

I had no real idea how to file taxes, so I made a lot of mistakes. And because I was utterly clueless, it cost me. I missed important deductions and credits. Even worse, I messed up the math.

I ended up owing money to the IRS because of my errors, but I learned a lesson. Afterward, I did my homework and made sure I did my taxes correctly.

Don’t make the same mistakes I did. Find out how to do your own taxes — the right way.

Do I Need to File My Taxes?

The government doesn’t require everyone to file a tax return, so the first step is to figure out if you actually need to file. Three main factors determine if you need to file your taxes:

If you’re single and under the age of 65, you have to file taxes if you make more than $10,350 a year. If you’re married, filing jointly and your household income is more than $20,700, you also have to file a return.

If you make less than those annual amounts and are a dependent on your parents’ taxes, you do not need to file an individual return.

If you’re still not sure if you have to file a return, the IRS recently launched the “Do I Need to File a Return?” tool. It’s a questionnaire that takes about 10 minutes to complete. Once you’re done, the IRS will give you a recommendation on filing a return.

Important Tax Deadlines for 2017

You were probably always taught that the tax filing deadline is April 15. Though that’s normally true, this year is an exception. In 2017, you have three extra days to complete your taxes because tax deadline is April 18.

This year, April 15 is a Saturday, and the IRS doesn’t allow the tax deadline to fall on a weekend. The following Monday is Emancipation Day, a legal holiday in the District of Columbia. The IRS closes their offices that day, so the whole nation gets an extra day.

How to Request a Tax Extension

When learning how to do taxes, remember that if you’re going through a hardship or will be unable to file your return by April 18, you can get an extension. By filing a tax extension request, you can get up to six extra months to complete your return.

An extension can give you a reprieve in filing your return, but if you owe any money to the IRS it’s still due by April 18. If you miss that deadline, you could owe late fees and penalties. (Unpaid taxes can also damage your credit report.)

Documents You Need to File Your Taxes

When you’re preparing to do your taxes, collect the necessary documents ahead of time. It’s common for forms to trickle in slowly, so keeping a folder specifically for tax documents can help you track everything you need.

Here are some common documents that you may need to file your taxes:

W-2: A W-2 is a form your part-time or full-time employer sends you. It shows how much money you made in the past year and how much you paid toward taxes, Social Security and Medicare.

1099: If you earned more than $600 by freelancing or working a side-gig such as driving for Uber, your client will send you a 1099 form. The form shows how much you made last year, but unlike W-2s, no money was taken out for taxes.

Other income records: If you worked a side hustle but made less than $600 for a client, you won’t get a 1099 but you still have to report that income. Keeping a spreadsheet of your earnings or having a separate business bank account can help simplify tax time.

1098: If you made interest payments on your student loans, your lender will send you a 1098 form saying how much interest you paid last year.

1095-A: If you got health insurance through Healthcare.gov, the government will send you a 1095-A form. This says you had qualifying coverage for the year.

Interest earned: If you earned interest from any savings accounts over the year, your bank will send you a form. This will show how much interest you gained.

Bank account routing number: To get your tax refund as quickly as possible, it’s a good idea to sign up for direct deposit when you file your return. To do so, you’ll need your bank account number and your routing number.

Expenses and receipts: If you landed a new job, moved to advance your career or attended business conferences, you can deduct associated costs. Make sure you keep receipts to use when you do your taxes.

How to File Taxes: Which Method?

While you can certainly do your taxes the old-fashioned way, using the paper forms can lead to errors. There are many options that can help you file your taxes more accurately:

Tax software: You can file your taxes electronically using available programs such as TurboTax or Credit Karma’s free filing tool. Some options are free but others have a fee, so choose a program based on your preference. If you make less than $64,000, you can use the IRS’ free filing tool.

VITA sites: If you need more hands-on aid and make under $54,000, you can get free in-person help. Try using an IRS-trained volunteer at a Volunteer Income Tax Assistance (VITA) site.

Hire a tax professional: When doing your own taxes is too confusing or complicated, hire a tax professional. They can handle your taxes for you and ensure you get the maximum refund available.

When choosing which option is best for you, consider how complex your taxes are. If you’re employed and have a side-hustle, but don’t have a business partnership or many investments, using software may be more than enough.

But if you run your own business, own a rental property or have investments, your taxes may be complex enough to warrant professional assistance.

Know Your Deductions and Credits

In the early stages of your career, you are unlikely to have enough deductions to make it worthwhile to itemize. Instead, you can claim the standard deduction of $6,300 and reduce how much of your income is taxable.

But you may be eligible for certain credits or deductions, even if you don’t itemize. Credits reduce what you owe in taxes, while tax deductions lower your taxable income. Both are valuable items to consider when doing your taxes and can help you get your maximum refund.

Here are some of the most common credits and deductions:

American Opportunity Tax Credit (AOTC): The AOTC is worth up to $2,500 per year and includes money paid for tuition and other related expenses.

Charitable Donation Deduction: If you donated money or items to a nonprofit organization, you may be able to deduct the value on your taxes.

Earned Income Tax Credit (EITC): The EITC is a valuable credit that 20% of eligible people miss out on because they don’t claim it on their taxes. The average EITC recipient gets an average of $2,482 by claiming the credit — you could be eligible if are a low-income earner.

Home Office Deduction: If you work from home or run a business from where you live, you may be able to deduct up to $1,500 on your taxes.

Lifetime Learning Credit: With the Lifetime Learning Credit, you can deduct up to $2,000 in qualifying education expenses.

Student Loan Interest Deduction: If you made payments on your student loans, you can deduct up to $2,500 that you paid towards interest on your taxes.

Tuition Fee Deduction: With the tuition fee deduction, you can deduct up to $4,000 in college tuition and other fees.

There are also ways to cut down your property taxes.

File Your Return

When it comes to filing your taxes, you must file both a federal and state return. If you lived in multiple states last year, you need to file a return for each state you resided in.

The only time you do not need to file a state return is if you live in a state that does not charge income tax. There are seven states that fit in this category:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

You can submit your federal and state returns using tax software or you can mail in the tax forms. Depending on where you live, where you need to send the forms may change, so check the IRS website before putting them in the mail.

How to Track Your Tax Refund

If you’re eligible for a tax refund, you can track your return’s status and find out when to expect your money by using the IRS’ “Where’s My Refund?” tool. If you opt for direct deposit, you can expect your refund in as little as 10 days after filing.

How Can I Pay My Taxes If I Owe the IRS Money?

If instead of a refund, you owe money to the IRS, you have different payment options. If you use software to prepare your taxes, you can usually pay the money owed electronically through the program.

If you did your taxes on your own or didn’t pay electronically, you can use the IRS payment tool. Just make a payment through your checking account on the IRS website.

If you owe more than you can pay upfront, you can contact the IRS to set up a payment agreement and make monthly installments.

Learning How to Do Your Own Taxes

Figuring out how to file taxes for the first time can be confusing, overwhelming and stressful. Managing the process on your own can be difficult.

Using this guide — and the help of tax software or a professional — can help streamline the process and ensure you handle your taxes correctly.

For more information on how to file taxes and why it’s so important to be accurate, here are four reasons you should never lie on your taxes. You can read up on how to file your taxes for free here.

How thinking like a poker player can help you get a raise

Published: Tuesday, January 06, 2015 @ 10:02 AM
Updated: Tuesday, January 06, 2015 @ 10:02 AM

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Not everyone has a taste for poker, and people choose to not play it for a variety of reasons. Perhaps they don’t have the math skills or they just don’t understand the game. It could be they have little tolerance for risk and don’t enjoy formulating and following game strategy. Some people don’t handle losing well, so it’s best to avoid games with high stakes.

That’s fine. You don’t need to like poker. You can go your whole life without needing to play it — no one will force you to.

That doesn’t mean you can’t use the basic poker skills to your advantage. There are a lot of lessons you can learn from poker that will help you thrive personally and professionally. Rather than have you put money on the line to learn them, we decided it made more sense to ask experienced poker players to share the most valuable things they’ve learned from the game and apply them to something most people experience but many don’t enjoy doing: salary negotiation.

1. Read the Situation

When going into your boss’ office to ask for a pay raise, there are a lot of factors in play that will impact the outcome of your discussion. There are the facts — you know what skills you bring to the table, and the employer knows how much he or she can afford to pay you — and there’s not much you can do to alter those.

Here’s where the dynamics of your meeting come in. You have no control over the cards your boss is holding, but you can persuade him or her to play in your favor by delivering a convincing pitch without appearing vulnerable. Just as in poker, body language has a huge impact on someone’s perception of you and can affect the way they respond.

David Daneshgar, a former professional poker player who won an event at the 2008 World Series of Poker, said everything from posture to breathing patterns can have a huge impact in how seriously you’re taken by the person across the table.

“Act genuine and normal,” Daneshgar said. “I wouldn’t come off too cocky — people in poker with a bad hand would overcompensate with action.”

2. Get Comfortable With an Uncomfortable Situation

The stakes can be high when asking for a raise. For some people, it may mean the difference between paying off debt or having to make tough personal budget cuts. No matter how badly you want to win, you have to understand that you may not and be willing to accept that. Negotiating for a raise may be extremely stressful, but you can’t let your emotions derail your game plan. If you’ve given your strategy a lot of thought and believe you’ve come up with the best course of action you can think of, stick to it, even when things aren’t going well. Desperation won’t win you anything.

“One of the things in poker is, ‘don’t reveal your hand till it’s time’,” said John Rogers, an amateur poker player who has used his 12 years of experience to guide him through the tough stages of entrepreneurship. One of the most common things Rogers sees among new players is a tendency to hold their cards too high or have to look back at their hand frequently, allowing other players to pounce on that vulnerability.

3. Learn to Make Quick Decisions

In poker, quick decision-making indicates you know what you’re doing, Daneshgar said. Don’t mistake immediate action for impulsiveness, because making good decisions requires a lot of thought — just make sure you’re done thinking before you head into negotiations.

It requires a lot of prep work. Daneshgar said poker players run through the scenarios in their minds, knowing exactly what they’ll do in any given situation. A slow response indicates unpreparedness. If you’re asking to receive a larger paycheck, your boss should rightly expect you to have given your request a lot of thought and be able to stand behind everything you’re asking for.

“If they’re thinking on the spot, they haven’t thought it through,” Daneshgar said. To get what you want out of a negotiation, you need to know what you want before the back-and-forth even starts. Even if the situation doesn’t end up the way you would have liked it to, you can reflect on it knowing you did everything you could to have it play in your favor, and you can’t always win.

4. Assess the Risks Associated With Each Scenario

If you play poker, you will lose a lot. When you ask for changes to your compensation, you may not get everything you want. When deciding how to proceed through salary negotiations, decide what’s worth fighting for,based on how much you have to lose if you don’t get it.

This is a process we do daily. If you’re driving to a meeting and the traffic light turns yellow, you’re quickly assessing the risk of the situation: “I’ll definitely get in trouble if I’m late for this meeting, but there’s a good chance I won’t get a ticket if the light turns red as I pass through the intersection,” you think, as you press down on the gas pedal.

If you submit a long list of demands to your supervisor, there’s a very good chance he or she will deny some of them. On the flip side, you’re likely to get what you ask for if you’re requesting something very small — but is that really what you want? You have to know when — and if — you’re willing to walk away. Daneshgar gave an example: If he asks for nothing, his employer will certainly keep him around. If he asks for a $20,000 raise (a massive raise, in this scenario), he risks offending his employer, damaging his relationship with his boss or getting fired. Given those options, he’ll ask for something in between, knowing it’s not worth it to him to risk his job or settle for no raise.

5. Leave Emotions Out of It

Even with all the preparation you’ve put into asking for a raise, no matter how well you think you can read the temperature of your meeting, it’s possible the situation will not go at all the way you want it to. If nothing else, you want to walk away feeling good about the way you handled yourself and confident in your ability to learn from the experience.

“If you change your strategy because of emotional response, that’s a flaw, that’s a crack in the game,” Rogers said. In poker, it’s called tilt — allowing one hand to affect the way you play the next.

“In poker here’s the reality: If you lose a hand for $50,000 and you can’t let that go by and play another game, you’re going to lose a lot of money,” Daneshgar said. Getting emotional when you don’t get what you want in the workplace could translate into a loss of respect or credibility, which severely hampers your ability to succeed. If you don’t get what you asked for the first time, don’t let disappointment filter into your work. If you keep doing a good job and prove your value to the company, you have a much better chance of getting what you want the next time you have an opportunity to ask.

These skills are extremely useful in many career-related situations, not just asking for a raise. Both Rogers and Daneshgar used what they learned in poker to start their own businesses — Rogers is creating a digital poker table called Nucleus, and Daneshgar started online floral business BloomNation.com — and they say their ability to mitigate risk and take emotions out of their decisions have helped them succeed.

Such attitudes are extremely helpful in the world of personal finance, because things often don’t go the way you’d like them to (think home price negotiations). Planning is crucial to any kind of financial success, and as frustrating as failure can be, minimizing the amount of emotion you let dictate your decisions is likely to help you reach your goals.

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This article originally appeared on Credit.com.