When should you actually start planning for your tax return? For about 30% of the population it is April 14th – just a day before the tax deadline. If you are one of these people you are at the utter mercy of the tax man. But with some foresight you can start early – actually you should start much earlier before the end of the tax year.
Now you might ask – how does it help to start early on your taxes?
There are several things related to taxes that you simply cannot do once the year is passed. To name a few: Donating tax deductible charitable items, selling worthless stock, taking on or paying off a mortgage, refinancing your home etc. The list goes on and on. By taking some action before the end of the year, you buy yourself some extra time to plan. And advance planning could save you hundreds and even thousands in taxes. While its true that although having a tax impact, some major life changes cannot be planned- getting married, having a child etc. Hey, life is not all about making money and saving on taxes – but planning your financial life will surely get you a lot of stability in your personal life as well!
When you start planning, one of the things you need to do is to get a quick recap of your tax situation – sought of a preview of the tax return that you will be doing on April 15th.
Now how would you go about this – since tax rates, exemptions etc change every year. It would be great to work this out using a paper and pencil. But that would be the old old fashioned way that your grand parents used. But this is the 21st century, you do not need a paper and pen to do these kind of things.
All you have to do is to fire up your computer and search for the right tools. There are scores of online tools that can help you with this. Tools range from paycheck calculators, exemption calculators, mortgage amortization calculators, refinance calculators. But which is the right tool to use to get a preview of your tax situation? Something that will quickly tell you whether you are getting a tax refund or whether you owe the IRS?
A Tax Estimator or a Tax refund calculator is the right tool to use to quickly preview your tax return. It takes into account several things – your filing status, your dependents, your income, deductions, tax credits etc. It will tell you within 10 minutes or so, whether you will get a tax refund or whether you will owe money to the IRS. This could make the difference between taking a trip to Jamaica or slogging it out for the next few months to pay the taxman.
So isn’t this one heck of a time saver?
Search for the Tax Estimator online and you will find one on several websites. Important thing to note is that you will need to use an estimator for the current tax year or you will get a wrong picture.