I don't know what it is about taxes, but every year it feels absolutely shocking that I once again have to file. On some level, I know it's going to happen, and yet I never really feel prepared for it.
To find out what people can do today to get ready for next year's taxes and get a bigger refund, I talked with Jody Padar. She's known as the Radical CPA, and she's currently the head of tax strategy and evangelism at April, a fintech startup that aims to make filing your taxes easier by providing tax-planning services year-round.
1. First of all, getting a bigger refund isn't always better, so think about what makes the most sense for your money-management style before you make any changes.
2. Taking advantage of tax credits is the most powerful way to reduce the amount that you owe, and some credits can beef up your refund, too.
3. Deductions are another way to reduce the amount you owe, but they aren't as impactful as credits.
4. If you have a 401(k) through your employer, putting money in it reduces your taxable income. Less taxable income = paying less in taxes.
5. If you get a W-2 from your job, you can also adjust your withholding so more money gets taken out of your paycheck for a bigger refund.
6. If you are self-employed, deductions are a huge way to reduce your taxable income. And being organized throughout the year will save you a ton of time come tax season.
7. And she has another tip for self-employed folks — and people who don't have a 401(k) through their employers: Set up an independent retirement arrangement and contribute to it to lower your taxable income.
8. If you have a W-2 job and freelance on the side, you can have more money withheld from your checks to cover your freelance taxes.
9. But at a certain point in your side hustle or self-employed life, you might want to talk to a tax pro for more personalized guidance.
10. If you work remotely and move to a different state, update your employer on your location change immediately to keep the headaches to a minimum.
11. Remote workers might also need to plan for city and local taxes in addition to state tax.
12. If you have kids, keep in mind that child tax credits will be going back to prepandemic levels, so your return will look different next year.
13. Finally, if you're paying off student loans, don't forget to take a deduction for the interest you've paid each year.
Now I'm curious. Would you rather get a big, juicy refund check or have more cash in hand every payday? Share your take in the comments!
And for more posts about life and money, like these expert tips for fighting burnout at work or the money lessons millennials learned the hard way, check out the rest of our personal finance posts.