Posted by Abundant Wealth Planning LLC

How To Collect a Bigger Refund

How To Collect a Bigger Refund

Are you sure that you’ll collect your full refund this Tax year?  Misfiling your taxes or not being aware of the opportunities available to you can result in a smaller refund than you deserve!  At Abundant Wealth Planning LLC, we can make sure that you get the most out of your refund.  Here are some tips to help you claim a bigger refund.

  1. Know Your Filing Status.  The right filing status can make a big difference in your refund.  If you are claiming the wrong filing status, it could mean the difference between hundreds of dollars in your refund.  Many taxpayers believe they are protecting themselves or their spouses by filing under a certain status, when in actuality they could be claiming the most profitable status available to them and taking alternative measures to maintain protection and decrease liability.


  1. Don’t Be Scared.  The fear of facing an audit stops taxpayers year after year from claiming the deductions they are entitled to.  Many medical, work and business expenses are overlooked, even by those who itemize their deductions each year.  Either the deduction seems unrealistic to the taxpayer, or they fear that claiming the expense will somehow cause them to stand out to the IRS to investigate.  A common deduction that strikes this fear in people is the home office deduction, which is also on this list.

 

  1. Claim Your Home Office.  If you work at least part of the time from home, and you have a separate space set aside to conduct your business, this is considered a home office.  The space must be used exclusively for business, or be a place where you regularly meet with clients, but based on the square footage you can deduct a percentage of your household utility bills as well as any supplies or improvements to furnish the office.


  1. Plan Ahead.  Trying to hunt down your deductions each year may seem like a lot of work, but you can take simple steps to maintain records throughout the year.  This is the easiest way to boost your refund, simply because it helps you get organized!  You could have a fantastic memory, but it’s doubtful that you will remember each qualifying purchase you made and mileage traveled for work or medical care by the end of the year.  Preparing and organizing your finances professionally can save you thousands of dollars over extended periods of time, because it takes into consideration major life events and how they will be taxed by the IRS- including any available loopholes or deductions!


  1. Plan for Your Retirement.  Traditional IRA contributions are tax deductible!  You’re basically collecting a deduction on paying yourself.  While you will be taxed on the distribution someday, you can delay this process by contributing early and claiming your deduction.  Alternatively, you could contribute to a Roth IRA, which, although taxable, can qualify you for the contribution credit.  The Roth IRA is not taxable upon distribution, meaning that you’re truly reaping the benefits of saving for retirement.


  1. Stay Informed of New Credits.  Credits will usually yield a bigger refund than a deduction.  Some credits, like education credits or earned income credits, are available in certain circumstances and periods in your life, and missing them means you could be missing out!  In addition, the IRS will many times offer temporary credits for a year or number of years that result in huge benefits for the recipient.  An example of this would be the energy efficient home improvement credit, or as a past example, the first time homebuyers credit. Make sure you have a trusted professional you work with to keep you apprised of these developments. 

 

  1. Check Your Withholdings.  Another way to increase your refund is to change your withholdings on your W-4 at work.  Think of this method like a loan.  The money is yours.  If you overpay your taxes, you get a refund.  So you have to determine whether you prefer to receive more money in your check on a weekly basis, or receive a lump sum at the end of the year.  Keep in mind that this is not the most preferred way to save money, since it can be tough to predict the exact amount you’ll get back.  If you are on a limited income, this is not recommended, as your paychecks will be smaller.  However, if you feel you make enough and would like to receive a large refund as a form of savings, perhaps for a vacation or large purchase, you are able to work the system so that you receive the money back in a lump sum.


  1. Take Credit for Taking Care of Your Family.  Most people claim their children on their tax return, but if you have another qualifying relative you are supporting or caring for, you may be able to claim them as a dependent as well.  Elderly parents that you financially take care of also qualify for the dependent care credit, under certain circumstances.  As mentioned before, credits are one of the best ways to receive a maximum benefit toward your refund. 


  1. Check Your Past Returns.  Having a professional look over your past returns is a great way to increase your refund or decrease your liability.  You have 2-3 years to file an amendment for an error in your return, and sometimes you could be missing out on money you were entitled to.

In order to ensure that you are getting the highest refund possible, contact Abundant Wealth Planning LLC for professional advice, consultation, and filing services.


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