By: Ashley Ann Reich
It seems as though April 15th continues to come faster with each passing year, and it is tough to keep up with all the nuances of preparing for Tax Day. The stress of trying to gather documentation from your employer and any other unique circumstances can be daunting. Additionally, if you are one of the lucky few who end up owing taxes each year, this can be a time that you dread from year to year, especially if you are uncertain how much you will owe and how you will be able to pay for it. Thankfully, there are many useful software programs that will walk you through each step and many professionals who can provide you with tips on how to avoid some of the common pitfalls when filing taxes.
Preparation is Key
Regardless of your comfort level with taxes, preparation ahead of time is key to a successful and on-time filing. If you are not good at organizing your past year’s expenses or income, you may want to consider having a tax professional assist you with filing taxes to avoid missing anything important. Additionally, if you own your own business or have a side gig producing 1099-type income, hiring a tax professional will save you a big headache of navigating expenses and potential write-offs. These situations can be tricky and, if not done correctly, can raise a red flag with the Internal Revenue Service (IRS).
Unfortunately, due to inflationary pressures, the cost of hiring an accountant or CPA has increased by 8.3%. Even many tax software programs have to increase their base filing cost to offset the cost of having professionals available to review your return. If you are owed a refund, many will use this money to pay for the software or professional, reducing the amount you end up getting back. It is important to include an increased buffer and research ahead of time for these expenses to ensure you are not caught by surprise.
Research Tax Year Changes
Before filing taxes, it is important to research the new year tax changes to ensure you are getting the best available benefits. For 2024, one significant change includes the standard deduction rising by $1,850 for single filers and $1,500 for married filing jointly and qualified widowers. Additionally, the IRS increased the tax brackets, that will allow most filers to see a smaller tax bill. The initial tax filing deadline was switched back to April 15, 2024, and the extension deadline will be October 15, 2024. These deadlines are important to check annually to ensure you meet the filing deadlines and not pay penalties.
For 2024, there were several notable changes to retirement and other investment contributions. For 401(k) or 403(b) plans, the IRS increased the maximum contribution from $20,500 to $22,500 and an extra $7,500 as a catch-up contribution if you are 50 or older. Traditional or Roth IRA contributions also saw an increase from $6,000 annually to $6,500. If you have not adjusted your paycheck to accommodate these increases, work with your Human Resources department and/or your financial planner at the beginning of each new year to ensure you contribute the maximum amount. These small increases add up over time when you get to retirement age.
*Hint – these amounts normally increase each year!
Let’s Get to Filing!
After some initial legwork has been completed, it is time to focus on getting those taxes filed and off your to-do list. Take careful note of ensuring that you have received all income forms for the past year from your employer(s), including W-2s and 1099s. If you find you are missing an employer W-2 or 1099, make sure to reach out immediately to get a copy of that form, as the deadline for providing it to you as an employee has passed. Most people without a complicated tax situation can gather and organize their documentation within an hour.
If you are uncertain which tax software to use or want to research the costs and benefits, there are helpful charts to compare current options. Many of the options nowadays come with online tax-guided assistance, including live humans who are there to answer more complex questions. Ramsey SmartTax even has a phone number to call a tax professional directly for questions. I know for me, being able to have a search feature as well as quality control checks during and right before filing gives me peace of mind that I am capturing everything I am eligible for and reduces my risk for a potential IRS audit.
Once you have submitted your federal and state tax returns, make sure to pay any taxes owed immediately to avoid interest or other penalties. If you are owed a refund, it is worth looking at adjusting your paycheck to ensure you get as close to breakeven – remember, if you received a refund, you have allowed the IRS to keep your hard-earned money, interest-free, all year. Filing your taxes does not have to be complicated or anxiety-producing as long as you have the right tools in place to be successful. Now, let’s get to filing!
*The author of this article is not a tax professional, and any tax situations should be reviewed by a professional tax preparer to ensure the accuracy of your taxes.
Ashley Ann Reich has been with Liberty University since 2007, first working in Student Financial Services and then as Executive Director of Government Affairs before transitioning to her current role as Senior Vice President of University Compliance. During her time at LU, Ashley started the first financial literacy program, reaching thousands of students in budgeting, paying down debt, and planning for the future.
