As the year comes to a close there are many things to start thinking about in the new year, one being your taxes. Tax time comes quick after the New Year and could bring a hefty tax debt bill if you aren’t prepared. One way to avoid owing the IRS is to take a look at your documentation and deductions before the year’s end.
Tax debts can be avoided if your tax liability is lowered. There are a few ways to do that. First, flex your deductions now. Make a donation to charity, which can be written off come tax time. Contributions of less than $250 will require proof, such as a bank record or cancelled check.
Another big area for deductions is the mortgage interest you paid over the year. If you want to boost your deduction in this area, make an extra mortgage payment before December 31. Making an extra payment will also mean you paid extra in interest on your loan, thereby increasing the total amount of interest you can claim in your deductions.
One aspect that is often missed by many people is completing a tax return accurately. It is estimated that the average taxpayer misses 10% or more in money because they underestimated their payments. This is usually because they failed to organize their documentation correctly. Make sure you have receipts and records of things like medical expenses, tuition payments, and school or business related expenses to give an accurate number of your out of pocket expenses this year. If you do find you will owe more than you can pay, contact a tax debt attorney to help guide you through the debt negotiation.