Tips & Tricks to Know for Your Family This Tax Season

The image source is Pexels.

The tax filing deadline for your family is April 15, 2021. Although there are a few days before you need to file, it is good for you to think ahead about ways you can increase your tax refund and minimize your tax liability.

Increase Retirement Contributions

For the 2018 tax year, the IRS gave $111.8 million in tax refunds. On average, people received refunds of around $2,869. The refunds given in 2021 have the potential to be even bigger. But you need to take some steps in advance. For example, your family should contribute as much as possible to retirement via an IRA account. This is one of the best ways to get tax benefits. Contributing to an IRA has two benefits. On the one hand, you reduce your taxable income. On the other hand, you are able to save for retirement. If you have not already contributed to an IRA, don’t worry. You have until the tax deadline to set up an IRA. In most cases, the IRA savings contribution limits have increased by around $500. Even self-employed people can get in on the action. For example, a Simplified Employee Pension IRA allows you to contribute up to 25 percent of your net earnings. The maximum limit for this year is $56,000. If you open up an IRA account before April 15, it will still count toward your return.

Get Help Resolving Tax Issues

If your family owes back taxes or if there are other tax issues that need to be resolved, paying your taxes can seem like a nightmare. This is because interacting with the IRS is time-consuming and stressful. Negotiating anything is difficult for most people. Negotiating with the IRS is the worst case scenario. Thankfully, you can get help with IRS tax resolution options. The IRS has strict guidelines for governing tax resolution. Before any company takes you on as a client, they are going to need to know upfront that you are eligible for tax resolution. This means that before you spend money out of your pocket, they are going to have to tell you about your situation based on your IRS filings. This ethical and honest approach to tax resolution saves your family money and guarantees the highest level of customer satisfaction. Tax resolution is right for your family if you have been receiving notices from the IRS. It is also ideal for your family if your wages are being garnished by the IRS.

Get a Health Savings Account

If you want to reduce your family's taxable income even further, you can contribute to a health savings account (HSA). You have until April 15 to contribute to this account and have it count against your tax liability. A health savings account has two benefits. On the one hand, it reduces your taxable income. On the other hand, it helps you put money aside in case there is a medical emergency. Having some money set aside to cover medical expenses is always good financial planning.

• If you are single and under 55, you can contribute up to $3,500.
• If you are married and under 55 or if you have a family, the limit goes up to $7,000.
• People over the age of 55 can contribute an extra $1,000.

A health savings account is a triple threat. First, contributions are made pre tax. Second, contributions can be withdrawn tax-free to cover medical expenses. Third, any money not used can be rolled over into an IRA or 401(k). Any gains you get from this are tax-deferred.

Take Advantage of Tax Credits

Tax credits are a solid way to reduce your tax bill. Your taxes are reduced on a dollar for dollar basis. For example, families can take a $2,000 child tax credit. This means that you will owe $2,000 less in taxes. Taxpayers who have low or modest incomes may benefit from the earned income tax credit. This can save as much as $6,550 for families with children or around $529 for taxpayers who do not have children but meet other requirements.

Conclusion

No one enjoys paying taxes. However, taxes allow the citizens of a country to enjoy clean drinking water, safe streets, fire departments, and law enforcement. Everyone should pay their fair share. At the same time, families should take advantage of all tax benefits available to them.