Despite the hullabaloo about tax deductions and increases, nothing has much changed for the average women. So, what should a financially smart woman do? Get information about all the tax breaks and take advantage of them as much she can. Read along to know how women can save money on taxes and relax.
- Gather your papers quickly: The sooner you collect your documents (W-2s, investment papers, receipts, etc.), the better. You'll need these documents at the time of filing your tax returns. Once your papers are ready, it'll be easier for you to file your tax returns within 17th April, 2014. Remember, the IRS will impose a penalty if you fail to file your tax returns within the deadline.
- Plan for kid's education smartly: It's tough to be a woman, especially when you've to save for your kid's education. On one hand, you need to save money for your kids uniforms and sneakers. On the other hand, you've to pay for your kid's college expenses. 529 Plans allow both men and women grow money tax-deferred. They can withdraw money for education related expenditures without paying any tax. This implies, women can make their money grow without paying taxes every year. They won't have to worry about paying taxes at the time of taking out money either.
- File tax without paying any money: Find out if the libraries and colleges in your locality are organizing any voluntary events where students help to fill out tax returns without charging a penny. If your yearly income is around $57,000 or less than that, then you can just visit IRS.gov/FreeFile and opt for free electronic filing. If your income is below $50,000, then go for the IRS's Volunteer Income Tax Assistance Program. This program helps you file your tax returns for free. You can call at 800-906-9887 and find out the centers (shopping malls, libraries and community centers) wherein volunteers are there to help you out.
- Contribute to retirement accounts: In comparison to 46% men employees, only 39% female workers come under the private pension plans. As per the reports of US Department of Labor, 32% of women workers receive pension benefits at the time of retiring, in comparison to 55% of men. The sad saga of women doesn't end here. Women earn only 76 for every dollar paid to a man. So, it goes beyond saying that, women face more financial challenges than men.
So, what is a possible solution? Well, one easy solution to the problem is to build a solid nest-egg. The IRS helps you build your retirement stash slowly but steadily. Every year, the deductible amount for the retirement saving accounts is raised due to inflation. In addition to that, there are some catch-up contributions for the people over 50 years.
- Use software and skip papers: Tax experts recommend to use a software program instead of using papers. Software helps you fill out the required forms without any hassle. All you need to do is give answers to some questions. That's it. The cost of the software is less than that of an accountant. Moreover, as you're filing your tax returns electronically, so there are high chances of receiving refunds quickly.
- Use tax breaks for your kids: You can get $1000 tax credit for the eligible kids, apart from the dependents' personal exemptions. Remember, this credit is just like getting $1000 tax-free amount in your wallet, considering your income is within a certain amount.
Do you have your own business? If yes, then you can ask your kids to help in your business. Give them a paycheck and deduct your payments to them. You may also ask your kids to start saving money. All you need to do is set up an IRA account for $4000 every year or upto an amount earned by them.
- Buy a health insurance policy before March 31, 2014: As per the new Affordable Care Act, you need to buy a health insurance policy before April 1, 2014. If you don't carry any health insurance policy before the deadline, then you'll have to pay a tax penalty. It is not that you've to pay the penalty this year. You need to pay the money when you file your tax returns in 2015.
- Deduct your traveling expenses for your new job: Did you relocate after getting a new job in 2013? Did you relocate to a place which is 50 miles away from your old house? If yes, then you can deduct 24 cents for every mile.
Did you take a flight to relocate? If yes, then you can even deduct the airfare and lodging expenditures.
3 Tips to avoid getting stressed during the tax season
- Sort out the important documents
- Itemize your tax deductions
- Find out your tax filing status when going through divorce
Are you going through a major life change such as divorce or switching jobs? If yes, you need to identify the tax consequences first. If you're not sure about the consequences, consult an accountant soon.