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February 14, 2024 / Alyssa Proctor
Consider these things when filing your tax return

Consider these things when filing your tax return

With the federal income tax filing deadline less than two months away – on Monday, April 15 – it’s time to start thinking about how you will prepare your return. Here are some things to consider that might reduce your tax bill.

  • Decide who will prepare and file your taxes. If you had major changes in your life in 2023 — maybe you got married or divorced, started your own business, or had to claim unemployment benefits — your taxes could be more complicated. As a result, you might want to consider hiring a CPA or other tax professional to prepare and file your taxes.
  • Make sure beneficiary designations are up to date. Beneficiary designations may not affect your taxes now, but they could affect the taxes of your heirs in the future. Now is a good time to make any changes you feel are needed to help minimize the taxes your beneficiaries and heirs will pay on your assets after you die.Graphic of a man calculating his taxes.
  • Maximize your retirement plan contributions. If you’ve been stingy about funding your employer-sponsored 401(k), 403(b), or other tax-deferred retirement account, you could do yourself a favor by increasing your contributions now. The money you put in these accounts reduces your taxable income for the year, which could reduce your tax bill. And it isn’t taxed until you withdraw it. Note: If you are age 70 ½ and older, you can make charitable donations directly from your IRA rather than writing checks or giving cash after taxes to save income tax on the IRA withdrawal.
  • Shield yourself from tax scams and fraud. As tax season approaches, many people start getting phone calls, emails, and text messages from entities claiming to be the IRS. These are scams. U.S. mail is the only way the IRS will correspond with you. Beware of a preparer who promises to get you a bigger refund. The tax preparer who makes promises like that could be unscrupulous and lead you into deep trouble.
  • Consider ‘bunching’ deductions. The standard deductions are nearly double what they used to be, making it hard for many taxpayers to itemize. But by bunching deductions – timing expenses by pushing deductible expenses into the same calendar year – you might be able to exceed the thresholds. Examples include moving forward certain deductions this year, such as charity donations, HSA contributions, or prepaying January’s mortgage payment.

Most importantly, don’t ignore the IRS. Taxpayers who don’t file returns and owe taxes, or who file but don’t pay taxes on time are risking serious penalties. The IRS can seize assets if necessary. If the IRS has been sending you letters because it found an error on your return or claims you owe back taxes, respond in writing — and don’t delay.

 

Alyssa Proctor is a wealth advisor for F&M Trust.

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