Taxes* and Identity Protection
What exactly is “smart tax management?” It’s a combination of filing in a timely manner and taking advantage of all the things that can help reduce the amount of money you pay in taxes. It can take a bit of planning and organization but has a great overall financial benefit. Our partners at BALANCE offer 5 steps to help you with smart tax management.
- Maximize retirement savings plans.
If you have an employer-sponsored retirement savings plan (such as a 401(k), 403(b), or 457) available to you, it makes sense to use it. Since you make contributions with pre-tax dollars, your taxable income and possibly your tax rate will be lowered.
- Use your employee benefits
If you are an employee, your company may offer benefits that can reduce your taxable income and therefore your tax liability, such as Flexible Spending Accounts (FSA's).
- Pay the right amount
You know you are paying the correct amount of taxes if you neither owe taxes nor receive a large tax refund. On the other hand, if you owe and can’t pay the entire sum, you’ll have to pay interest and possibly penalties, which will only add to your tax debt.
- Make the most of your adjustments, deductions and credits
Tax adjustments and deduction are expenses that you can subtract from your income, resulting in a lower taxable income. Common examples of these are:- Dependents
- Mortgage interest paid on your primary residence
- Equity loan or line of credit interest
- Charitable contributions to eligible organizations
- Union and professional dues
- File on time – whether you have the money or not
Filing your tax return by April 15 (or August 15 if you file an extension) is important. Even if you don’t have the money to pay, file anyway. Programs are available to help you avoid many of the harsher penalties. The drawbacks of not filing include:- Penalties and/or criminal prosecution if you continue to not file (considered tax evasion).
- Losing the refund, if there’s one due.
Identity Protection
Identity theft and consumer fraud can happen in an instant, so it’s important to protect yourself. While it is always important to be very careful when it comes to your personal and financial information, tax season is a crucial time to make sure you are taking the right measures to keep your information safe. Check out our Identity Protection Course on WealthMatters to learn simple tips to help reduce your risk of identity theft and protect your financially sensitive information.