Most of the taxpayers know the basic tax benefits regulations and rely on them to increase the amount of tax refund. Going with the stats released by Internal Revenue System (IRS) in Dec 2015, a total of 150,694,000 income tax returns were processed and 109,426,000 were the number of refunds issued. In terms of amount, IRS witnessed a rise of .1% in refund while the tax returns raised by .8% from the previous. [1]
The amount refunded summed up for a total of $306.016 Billion. The refund thus claimed maybe significant, but all taxpayers may not find it satisfactory individually. Many taxpayers intend to increase their tax refunds further, but only a few of them realize that it is very much possible – even after following the correct regulations.
We list you some of the hidden ways with the IRS regulations that can help you increase the tax refunds:
1. Declare Dependents
A number of expenses that you spend on your family are deductible from taxes. Varying with the type of expense, you can deduct the tax amount for both immediate and extended family. Here, the first thing that matters is declaring the correct status in the W-4 form. The form is usually filled when you join a job and it asks about your marital status, kids, etc. Providing the weighty and correct details, you gain yourself an added advantage of bettering the tax refund.
Another important factor is keeping details of the expenses on the family members. The day-care cost for your child or spent on care of elderly parents (relatives) can lower the taxes for you and hence, the refund climbs.
2. Charity Comes Back
Even before karma notices your goodwill in the form of charity, IRS recognizes its worth. Almost half of your tax is deductible from income because of charity. Another advantage is that charitable deductions cover a big number of options, so you can offer charity to any field that your care about. So, if your expenses include charity to a community group, college, non-profit healthcare, religious organization, etc., there is a healthy chance for you to ask for more tax refunds.
Charitable spends are often not tracked by the taxpayers as they do not realize the tax benefits that it offers. Modern accounting software offers an expert track on such expenses as they have built-in features to calculate the available refunds. Some taxpayers try to delay the charities till the tax season for better tracking.
3. IRA Contribution Matters
The relationship between retirement plans and taxes is well known. Yet, a good number of taxpayer forgets to take advantage of it. Individual Retirement Account (IRA) help the taxpayers save the taxes in a big way. It requires your employer to not cover you for the retirement plan. Considering the general private sector trend, a chunk of the taxpayers are likely to receive this tax benefit.
Variation with rules of Roth IRA and traditional IRA must be taken into the count as per your eligibility. Choose quality and updated tax software to process the correct calculations with the refunds.
4. Make Smart Choice with Your Status
If you are married then there are a number of hassles that you can avoid by filling as a married couple. Additionally, in most cases, the amount of saving with taxes grows in that status. However, this is not a case of one one-size fit all. Calculations for individual filing and coupled filing must be done. It is possible in some cases that your individual filing payment is lesser than coupled ones.
Since the Adjusted Gross Income (AGI) is the criteria used by IRS for married couples. In case, the spouse has a high tax-saving expenditure (like: medical expense) and lower income, then it is possible to save the taxes more as higher income of your income may increase AGI and thus, invite more taxes. So, be more calculative with the approach.
Wrapping Up
Tracking all the expenses and categorizing them precisely is one of the most important constituents for the increasing the tax refunds. Relying on technology by switching to tax software is one of the easiest ways to achieve that as they can identify the expenses correctly and offer better calculations. Hosting tax software on the cloud can add more power to the solution as the software is available anywhere and anytime. Further with the automated backup, the chances of loss are minimized.
References:
[1] https://www.irs.gov/uac/Newsroom/Filing-Season-Statistics-for-Week-Ending-December-25-2015
