Tax season officially began January 30th, two weeks later than usual thanks to Congress’ battle over the fiscal cliff. For those of us that expect to receive a refund, tax season is actually a pretty welcome time of year. Who doesn’t love free money, right?
However, for those of us that kept a little more of our paycheck last year and are expecting to owe Uncle Sam some money, tax season can be stressful. There are forms to fill out, credits to keep track of and, if you plan on itemizing your taxes (recommended for the biggest return, by the way), a TON of receipts to file through.
So depending on who you are, tax season can be a blessing or a curse. But no matter what your situation is, tax season doesn’t have to be so dreadful on your checking sand savings accounts if you plan accordingly and take advantage of all the credits you’re allotted by the good ole’ U.S. of A.
Here are a few tips helpful tips to save money during tax season. For starters…
- Easy return? Try filing your taxes online
If you’ve never filed your taxes online, you might be surprised by how simple and straightforward the process is. Whether you’re using the IRS’s website or a program like TurboTax, filing your taxes on your own is the fast and affordable way to go.
If you have an “easy” return to file – maybe one or two W-2′s and few untaxed assets to account for – then maybe this is the year to consider filing your taxes online, independently. This will save you money on hiring an accountant or dropping your taxes off at an agency, assuming you file your taxes correctly.
For what it’s worth, online services are very particular about making sure all your income is accounted for, and some guarantee that you’ll get your biggest refund. And in most cases, it’s the faster way to get your taxes filed and your return back (if you’re getting one).
Odds are you’re doing just about everything else online. Maybe it’s time to try out filing your taxes online, too.
- Be aware of all tax credits available to you
This is especially important if you plan on filing your taxes online. Knowing the tax credits available to you can also give you an idea on whether or not you should expect to see a return, and might determine whether you feel comfortable or uncomfortable filing your taxes on your own.
Odds are there are several tax credits you’re unaware of, many of which you might have been eligible for in the past but failed to take advantage of. There are tax credits available for renters, business expenses, job-hunting expenses, student loans, dependents and more.
We mentioned you should file your taxes on your own if you think they’re going to be uncomplicated. If you see yourself getting lost in the number of credits and deductions available, then maybe it’s best to walk over to your local tax agency or accountant and hire a professional. Better safe than sorry.
- Consolidate your debts
This suggestion is tied more to the overall “house-cleaning” of your finances during tax season than it is to taxes themselves. Filing your taxes gives you the chance to put the previous financial year behind you and look to the future; there’s no reason you should procrastinate on doing the same with your debts, too.
For instance, if you’re going through your expenses and realize that you’ve been paying a ton in interest on your credit card bills, then consider transferring your credit balance to a credit card with 0% APR on balance transfers.
Many consumers aren’t aware that they can simply transfer their old credit card balances to a new card, and many cards offer a 0% interest on balance transfers for up to 18 months as an incentive for consumers to switch issuers. This is one of the easiest ways to save money on interest while making life easier via debt consolidation; it’s easier to pay one bill rather than two, right?
If you’ve seen very little movement on your credit card balance despite making minimum payments each month or close to it, consider moving that old balance over to a new, zero percent APR credit card.
- Temporarily cut back on spending
Finally, the easiest way to save money during tax season is to – of course – cut back on spending.
If you’re unsure as to whether or not you’ll be receiving a tax return this year, then it’s recommended that you spend a little more and save a little less; that way you’re not blindsided if you suddenly owe the IRS.
The recommended strategy is to start setting aside a little extra from your paycheck now, and to file your taxes as soon as you can. (Note that taxpayers who plan on claiming the Lifetime Learning Credit or the American Opportunity Tax Credit will have to wait until mid-February to file due to a processing delay.)
If you didn’t pay much or any taxes from your check last year, expect to pay the IRS handsomely in 2013. This will likely mean a payment plan which, unfortunately, adds another monthly bill to your budget. So the exercise in cutting expenses may as well begin sooner rather than later.
Spending cuts mean something different to everyone; you might dine out less or cut back on driving. But the most important thing you can do to save is to draw a line in the sand between unavailable income and disposable income. Your bills – whether it’s an IRS payment or your rent – should be put away as unavailable, that way you don’t have to borrow from your savings or pay your bills with your credit card to keep up with monthly expenses.
If you find yourself in the red this tax season, then consider restructuring your paycheck to pay more taxes throughout the year. That way you’ll find the tax season a lot less dreadful come 2014…