04 Dec Get A Bigger Tax Refund In 2016
December is a busy month, and taxes — understandably — are not top of mind for most people. But in order to score the largest possible tax refund come April, tax moves must be made before the clock strikes midnight on Jan. 1.
The average federal tax bill was nearly $9,000 in 2014, with over $1.3 trillion paid across almost 148 million tax returns. Everyone loves a tax refund, and 80 percent of Americans received one, but some taxpayers left money on the table. According to the IRS, about 3 percent of tax returns had mistakes that resulted in a smaller tax refund than was possible.
Inaccuracies are one thing, but proactive tax planning in December can bulk up a tax refund. If you’re a cash-strapped millennial, you’re more likely to experience certain tax-altering life events and earn self-employment income. So, reducing your tax bill is key. The best part is, it isn’t as difficult — or boring — as you might think.
Between holiday parties and travel plans this month, schedule some time to reflect on 2015. If you fit into one or more of the following categories, you can save big bucks by taking advantage of the corresponding end-of-year tax strategies.
“The freelance economy seems to be where a lot of millennials end up, and they do have more complex tax situations,” says Jody Padar, author of “The Radical CPA” and CEO of New Vision CPA Group in Mount Prospect, Illinois.
Business owners and freelancers can take advantage of holiday sales to purchase computers or other expensive office equipment, which are deductible for tax purposes. Even a new car could count as a business expense for Uber or Lyft drivers. “A lot of them are very surprised that you can actually write off a certain amount of your car, up to $25,000 for any SUV or vehicle under 6,000 pounds,” says Lisa Greene-Lewis, a certified public account and TurboTax tax expert.
Padar recommends that you get organized before the end of the year by uploading receipts to an app like Hubdoc, which turns financial documents into digital files that are easy to store. She also says it’s smart to open a separate account for business deposits and expenses. “Keep business expenses separate from personal expenses because the biggest audit flag is going to be when you’re stuff is all commingled,” Padar says.