Tips for Saving Up for Tax Season
If you’re one of those people who is caught by surprise when tax season is upon us, you’ll want to start planning a bit earlier this year. Although no one really likes thinking about taxes (except for maybe accountants), it’s important to save money throughout the year to make sure you can make the payment come April 15.
If you indicated on your W-4 that your employer should withhold a certain amount of each paycheck for tax purposes, then you’ve already taken a step in the right direction. But there are other money-saving tips that will help make sure you’re ready for tax season when it comes.
Donate to Charity
If you’ve been contemplating whether or not you can afford to donate to a charity this year, consider this: It could actually save you money. That’s right–charitable donations can be deducted from your taxes. Just make sure you keep a clear record of whatever you donated–anything over $250 must be documented. You’ll need a receipt or dated bank record to prove you made the cash contribution.
Break Out The Piggy Bank
The easiest way to save for tax season? Put a little money aside each month throughout the year. Just like your employer directly deposits your paycheck into your bank account, many financial institutions allow you to set up an automatic transfer from your checking account to your savings account. It makes saving so easy that you won’t even notice the money is gone! Then, if you find out that you didn’t withhold enough money for taxes from your paycheck, you’ll have a bit of a financial cushion to make up the difference.
Do Your Research
The process of paying taxes can be intimidating, which is why many people choose to simply pay an accountant to do it for them. However, this can be expensive, and you can save a lot of money (which you can then put toward paying your taxes) by just doing it yourself. Spend some time up front to research the process or find software like TurboTax that will walk you through it.
Stick to a Budget
If you need to save money to put toward your taxes, it’s imperative that you stick to a predetermined budget. Instead of buying unnecessary items (like that thing you saw on an infomercial that you just had to have), save the money that is not spent on items already laid out in your budget (like rent, groceries and entertainment). Stay under budget and the approaching tax season will be less scary.