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You've Filed Your Taxes. Now What?

Apr 15, 2019 4 min read Heather R. Johnson

Key Takeaways

  • Get a system in place now to organize the coming year's tax documents.
  • Track your income and expenses to make sure you don't miss any deductions.
  • Evaluate your retirement savings and withholding to make the most of your hard-earned income.

 

Each tax season, do you find yourself buried under a mountain of paperwork, frantically organizing and adding so you can file your tax returns by April 15?

Make this the year you plan better. By implementing these tax tips all year long, you can lessen your tax season workload. You might also lower your tax bill.

 

Organize documents

As soon as you file your 2018 taxes, start filing tax-related documents in a central location. Consider a filing cabinet with hanging folders organized by tax category. Or create a "2019 Taxes" folder in your computer with tax-related documents organized in subfolders.

How long should you keep tax records? The IRS recommends Opens in new window that you keep tax records for up to seven years if you need to file a claim for a loss from worthless securities or bad debt deduction. Also, the IRS has six years to audit your taxes if it believes you omitted more than 25% of income from your return. If neither of those situations applies to you and you've been filing annually and accurately, then you can ditch those records after three years.

One note: Keep employment tax records for four years after you pay the tax, or it becomes due, whichever is later.

 

 

Track your income and expenses

If you've been stuffing receipts in an envelope or a shoebox, consider an upgrade.

By using an online bookkeeping program, you can categorize expenses as you go, which makes compiling reports much easier come tax time. Many versions sync with your bank accounts to automatically record deposits and withdrawals, sometimes even categorizing the transactions for you.

As an added benefit, improved bookkeeping may help you more accurately budget through the year. By tracking how much you spend, save and earn, you can be better prepared to maximize deductions the following year.

 

Evaluate your retirement contributions

Once your accountant recovers from their busy tax season, ask how you can save more to lower your tax burden. Whether you contribute to a 401(k), a SEP, a traditional or Roth IRA or some combination, make a plan to invest automatically each month.

And remember, the total contributions Opens in new window to traditional and Roth IRAs increases for 2019 to $6,000 ($7,000 for adults age 50 and over). The maximum you can contribute to a 401(k) Opens in new window increases to $19,000 ($25,000 for adults age 50 and over).

 

Evaluate your withholdings

If your employer withholds taxes from your paycheck, make sure it's withholding the correct amount. Withhold too little, and you're stuck with a tax bill and possible penalties. Withhold too much, and you may get a refund, but you give the IRS an interest-free loan.

Not sure how much to withhold? Use the IRS withholding calculator Opens in new window to perform what it calls a "paycheck checkup." You'll need your most recent pay stubs and tax return to use the calculator.

 

Plan for tax reform

The Tax Cuts and Jobs Act instituted many changes Opens in new window for the 2018 and 2019 tax years. Understand how the new laws may affect you in the years to come. Here are a few changes to take note of:

  • Do you plan to buy or sell a home next year? The mortgage interest deduction has changed. Depending on where you live and the price of your home, it could affect your taxes.

For homes bought on or after December 15, 2017, you can deduct mortgage interest on debt up to $750,00 ($375,000 if married filing separately). The new limits apply to the combined interest related to your primary home and a second home.

  • You can deduct property taxes, up to a point: the total amount of property, state and local income taxes and sales taxes can't exceed $10,000.

  • Are you and your spouse considering divorce? For divorces finalized after 2018, alimony will be nondeductible for the payer and tax-free to the recipient.

  • Having another child? The Child Tax Credit has doubled to $2,000.

  • Do you have high medical expenses? In 2018, you can deduct qualified medical expenses that exceed 7.5% of your adjusted gross income (AGI). Starting in 2019, you can deduct only the amount of unreimbursed allowable medical care expenses that exceed 10% of your AGI.

By focusing on tax-related expenses periodically throughout the year, you can approach April 15 with less anxiety. And with an organized system for tracking income and expenses, you'll be able to budget more wisely and stay in your accountant's good graces.

 

What you can do next

If you set aside as much as you can into your 401(k) and IRAs, you'll lower your tax burden and achieve your retirement goals. Use this calculator Opens in new window to see if you're on track.

 

Please consult your tax advisor about your personal circumstances.

 

Heather R. Johnson writes about finance, small business and healthcare from Oakland, California. Her work has appeared in the San Francisco Chronicle and Houston Chronicle, and with brands such as Bank of America, Wells Fargo and RE/MAX, among others.

 

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