Update: Due to the pandemic, the IRS has extended the tax deadline for the 2020 tax year from April 15, 2021 to May 17, 2021. This only applies to individual federal income returns and tax payments, not a state’s income tax deadline, including state payments or deposits.
With 2020 come and gone, tax season is almost upon us. Wondering how to maximize your tax return and get a bigger refund? You’re in luck—we’ve got some tips that can help you out. We’ll cover everything from deductions to savings accounts to tax software in this brief guide.
So, without further ado, here are seven top tips to help you learn how to get the most out of your tax return.
Tip 1: Check Your Filing Status
If you use an accountant at tax time, make sure you tell them if you get married, get divorced or experience any other life changes. The relationship you’re in—or not—on December 31st determines your filing status for the whole of 2020. Filing statuses include:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widower
You can only file using the head of household (HOH) status for 2020 if you:
- Are unmarried on December 31st
- Paid more than 50% of the costs of maintaining your home in 2020, AND
- Have one or more dependents living with you for at least six full months in 2020
Head of household usually gives you a tax advantage, so if you can, go for HOH over single filing status.
Tip 2: Claim All Available Deductions
Itemizing this year? Delve deeply into deductions to make sure you don’t miss any tax breaks. Popular deductions include:
- Medical costs
- Charitable donations
- Prepaid interest on a mortgage
- Education expenses
Deductions come off your gross income, reducing your AGI and the amount of money you have to pay taxes on. If you play your cards right on the deduction front, you could put yourself in a lower tax bracket.
Do You Get a Bigger Tax Refund if You Claim 1 or 0?
Want to learn how to maximize your tax refund? If you claim a dependent on your W4 form, you’ll get more money in your paycheck but you’ll receive a smaller tax refund—and you could owe tax. If you don’t claim a dependent on your W4, you’ll take home less money each month, but you’ll get a bigger tax refund at the end of the year—or you’ll break even.
Tip 3: Report All Income
You have to report all eligible income on your tax return. If you don’t, you could get into serious trouble with the IRS if your returns are audited in the future. If the IRS discovers unreported income, you’ll have to pay interest and penalties—and that can amount to a lot of money.
Before you file your return, consider all your sources of income for 2020. Include things like:
- Income from contract work
- Interest on your savings account
- Dividend payments
You might want to use a spreadsheet to keep up. It might seem old school, but spreadsheets can help you stay on top of small amounts of 1099-related income throughout the year.
Tip 4: Double-Check Your Math
Math errors on tax returns are common. If you use paper forms or fillable forms on the IRS Free File site, examine them closely before you hit the submit button. A tax preparer or accountant can help you if you have a complicated tax situation.
You can avoid a lot of math errors if you use tax software. TaxAct®, for example, guides you through the tax prep process and offers tips along the way. The version of TaxAct for simple, federal returns is free—and Deluxe, Premier and Self-Employed tiers offer great value for money. Click on the button below to get 25% off TaxAct products today.
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Tip 5: Contribute to Retirement and Savings Accounts
Don’t leave money on the table at the end of the tax year. If you can, use all your Flexible Spending Account (FSA) dollars by December 31st. If you have a 529 college savings plan, contribute as much as you can during the tax year to reduce your tax burden.
Don’t forget to:
Tip 6: Triple-Check Your Bank Account Details
Whatever you do, check your bank account details twice before you submit your tax return. If you mistype digits, you won’t get your refund as expected—and it might take a while to correct your mistake.
Tip 7: Get Your Taxes Done on Time
You need to submit your 2020 tax return by the April 15th, 2021 deadline. Paper returns must be postmarked by April 15th, and electronically filed returns have to be in by midnight in your time zone. If you need extra time, you can file an extension, which will give you until mid-October to file your taxes.
What if I File My Taxes Late?
Simply put, if you file your taxes late, you’ll be subject to penalties and interest—especially if you owe the IRS. You’ll have to pay 5% of your unpaid taxes over a maximum of five months—and that adds up quickly. If you have to file your tax paperwork late, make sure you pay any tax owed by April 15th to avoid interest and mail your tax return or e-file as soon as possible afterward.
Make a tax payment even if you only have a rough estimate of the amount of tax you’ll need to pay. If you overpay, the IRS will issue a refund, and if you underpay, you won’t pay interest on such a large amount of money.
Bonus Tip: File a Return Even if You Don’t Need To
If you earn less than the filing minimum—$12,200 for single people or $24,400 if you’re married filing jointly—you might be tempted not to file a return at all. That could be a big mistake.
Refundable tax credits pay out even if you don’t make the filing minimum. The earned income tax credit (EITC), for example, pays up to $6,557 for a family of five or more. According to the IRS, 20% of eligible people don’t claim the EITC because they’re not aware that they’re entitled to it.
How Can I Get a Bigger Refund?
Disappointed with the size of your refund check this year? Here are five ways to get a bigger refund next year:
- Itemize if you can: A lot of people choose the standard deduction because it’s less hassle, but if you can itemize instead, you might get a bigger refund.
- Quadruple-check your deductions: You might be entitled to deductions you’ve never even heard of, so scrutinize IRS guidelines thoroughly.
- Don’t forget about credits: Credits reduce your tax burden dollar for dollar, and refundable credits pay out even if you earn less than the filing minimum.
- Claim all dependents: If you’ve been financially supporting a vulnerable friend or an elderly family member, you may be able to claim them as a dependent.
- Fatten up your retirement account: If possible, contribute the maximum amount to your retirement account to reduce your taxable income.
When to Refile Taxes
Your taxes are finally done—but then, you discover a mistake. If you make an error on dependents, filing status, income, deductions or credits, you need to file an amended return as quickly as possible. You’ll need to refile within three years of the date you filed the original return, or two years from the day you paid any taxes due for the original year.
You won’t be able to file an amended tax return online. Instead, you’ll have to complete an old-fashioned paper 1040X, which you’ll need to mail to the IRS.
What is the fastest way to get my tax return?
Most tax professionals agree that people usually receive their refunds more quickly if they file their taxes electronically. Under normal circumstances, people who file electronically receive state and federal acceptance notices within a day or two. Checks often arrive within eight weeks if you submit a paper return and within three weeks if you e-file your taxes. Direct deposits usually arrive even more quickly.
So to recap, if you want your tax refund quickly, file electronically and choose the direct deposit option.
The Tax Return Wrap
Taxes aren’t exactly fun, but they’re vital nevertheless. You can improve your tax season experience by learning how to maximize your tax return and get a bigger refund from Uncle Sam. If you contribute as much as you can to your individual retirement and 529 savings accounts, claim all the deductions you’re entitled to and file your return on time, you’ll probably end up with a bigger check—or a smaller bill.
Disclosure: 25% offer is only valid until 10/31/21 at 11:55 pm CT for state and federal 2020 online returns and specified ancillary services and may not be combined with other offers. Additional fees apply for state returns. Add sales tax for applicable orders. Intended only for Credit.com customers using the offer link provided directly by Credit.com to create a new return.
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