Tax Tip 2023-86<\/p>\n
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Just because a taxpayer filed a tax return doesn\u2019t mean they should forget taxes until next year. What a taxpayer does now may affect the tax they owe or the refund they may receive next year.<\/p>\n
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Here are some simple year-round tax planning pointers for all taxpayers.<\/strong><\/p>\n \u00a0<\/strong><\/p>\n Organize tax records<\/strong>. Create a system that keeps all important information together. Taxpayers can use a software program for electronic recordkeeping or store paper documents in clearly labeled folders. They should add tax records to their files as they receive them. Organized records will make tax return preparation easier and may help taxpayers discover overlooked deductions or credits.<\/p>\n <\/p>\n Identify filing status<\/strong>. A taxpayer\u2019s filing status is used to determine their filing requirements, standard deduction, eligibility for certain credits and the correct amount of tax they should pay. If more than one filing status applies to a taxpayer, they can get help choosing the best one for their tax situation with Interactive Tax Assistant, What Is My Filing Status<\/a>. Changes in family life \u2014 marriage, divorce, birth and death \u2014 may affect a person\u2019s tax situation, including filing status and eligibility for certain tax credits and deductions.<\/p>\n <\/p>\n Understand adjusted gross income (AGI)<\/strong>. AGI and tax rate are important factors in figuring taxes. AGI is the taxpayer\u2019s income from all sources minus any adjustments and deductions. Generally, the higher a taxpayer\u2019s AGI, the higher their tax rate and the more tax they pay. Tax planning can include making changes during the year that lower a taxpayer\u2019s AGI.<\/p>\n <\/p>\n Check withholding<\/strong>. Since federal taxes operate on a pay-as-you-go basis, taxpayers need to pay most of their tax as they earn income. Taxpayers should check that they\u2019re withholding enough from their pay to cover their taxes owed especially if their personal or financial situations change during the year. To check withholding, taxpayers can use the IRS Withholding Estimator<\/a>. If they want to change their tax withholding, taxpayers should provide their employer with an updated Form W-4. Changing withholding and having more withheld may lower their AGI and affect their tax bill or expected refund.<\/p>\n <\/p>\n