A:

You may one of the lucky ones to come out on top this tax season, but as you will likely agree, it does not mean that you should rest on your laurels. Instead, use the experience gained during this tax season as a guide for the things that you can do better for next tax season.
The following are some tips that can help to ensure you have a smooth 2007 tax season:

  • Design a filing system for all your receipts and tax documents. The shoebox system is not the most effective, but it can be a good back up for information you enter into a database. Your shoebox system can be as simple as maintaining separate envelopes for different types of receipts, e.g. medical, educational, travel, charitable donations and job-hunting expenses. Before you file those receipts away, be sure to enter the amount into your database. If you are not ready to invest in a ready-made accounting software, and you are not spreadsheet savvy, ask your tax preparer to design a spreadsheet file for you to help keep you organized. Designing such a program takes no more than 10 minutes for someone who is familiar with the process.
  • If you received a large tax-refund, consider decreasing your tax withholding percentage, which would increase the amount you receive on your paycheck. The increased take-home pay can be routed to your savings account, including retirement accounts, as an automatic deposit. Many employer and plan administrator websites host calculators that can help you determine how an increase in withholding tax would affect your take-home pay.
  • If you owed income taxes, consider whether you need to pay estimated taxes during the year so as to avoid any penalties that may be owed for underpayment of taxes. See IRS Publication 505 at www.irs.gov for assistance with determining whether you need to pay higher estimated taxes.
  • If you missed the deadline for liquidating stocks for which you wanted to write off losses for last year, make a note to yourself to sell those stocks before year-end. (To read more, see How do I avoid paying excess taxes on securities I have sold?)

Getting an early start will help you to avoid year-end and tax-filing period rush, and it will help you keep on track with your financial goals throughout the year.

If you feel you will be unable to file your tax return by the deadline, see Get A Six-Month Tax Extension.

Question answered by Denise Appleby, CISP, CRC, CRPS, CRSP, APA

RELATED FAQS
  1. Will my extra earnings go down the drain after taxes?

    I want to take on a part time job to earn an extra $400 a month. I'm afraid my extra earnings may go down the drain after ... Read Answer >>
  2. I have just been laid off. Can I use my 401(k) for living expenses now and report ...

  3. What credits/deductions should I choose?

    My fiance and I had our first daughter in November of last year in Utah. She only worked a month. I think she made a total ... Read Answer >>
  4. Will a 10-99 form make my taxes higher?

    My employer is not withholding taxes each pay day. Will this increase my taxes because they will give ... Read Answer >>
  5. How do I determine what to pay in taxes if my employer doesn't withhold payroll taxes?

    If your employer doesn't withhold payroll taxes, you'll need to know these points to know how much to pay in income tax. ... Read Answer >>
  6. What is the difference between federal and state withholding tax?

    Discover whether you can file your taxes by yourself. The three main options for tax preparation are a tax professional, ... Read Answer >>
Related Articles
  1. Personal Finance

    Next Season, File Taxes On Your Own

    Master these fundamentals and you'll be doing your own taxes with minimal stress.
  2. Personal Finance

    Confused About Estimated Tax Deadlines for 2016?

    If you run a business or have investment income, pay attention to this year's estimated tax deadlines. Here are the details, and what's new for 2016.
  3. Personal Finance

    OK, So I'll Be Smarter Next Tax Time

    5 tax resolutions to start on right now for a smoother tax return next April 18. Yes, it's the same date in 2017.
  4. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  5. Personal Finance

    Simple Last-Minute Tax Tips

    A little preparation and organization can take the stress out of last-minute tax filing.
  6. Trading

    How To Owe Nothing On Your Federal Tax Return

    You have the control to determine whether you owe in April. Learn more here.
  7. Personal Finance

    Have Household Help? Don't Get In Tax Trouble

    Hiring household workers can be a complicated process. Know what the government requires so you can prevent penalties and problems down the road.
  8. Personal Finance

    Get a 6-Month Tax Extension

    Discover how to get some extra time from the IRS, without paying a hefty penalty for the privilege.
  9. Personal Finance

    Can't Pay Your Taxes? What to Do Now

    Not enough cash on hand for your April tax bill? No need to panic. Here's what to do.
  10. Personal Finance

    6 Sources For Free Tax Help

    From community-based services to free software, there are many free resources to help with your taxes.
RELATED TERMS
  1. Tax Season

    The time period between January 1 and April 15 of each year in ...
  2. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
  3. Withholding Allowance

    An allowance an individual claims on a W-4 Form. A withholding ...
  4. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  5. Direct Tax

    A tax that is paid directly by an individual or organization ...
  6. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center