Tax season is behind you, but the smartest time to lower next year’s bill is right now. These four steps — from adjusting withholding to mastering the new tax law — can spare you a nasty surprise next April.
It’s May, tax season is behind you, and the last thing you want to think about is going through that again. But Billshark wants you to think, not only about what unpleasant surprises you may have encountered this year, but how to avoid them next year. And the time to take steps to lower your tax bill is now.
Anything you do—or fail to do—in 2019 will impact your tax return next April, so reviewing these tips now could save you anguish down the line.
1 Adjust Your Withholding
The most important step you can take is to adjust your withholding. If you didn’t receive a refund (many taxpayers didn’t) you now know how much you need to have withheld from each paycheck to prevent you from having to owe next April. If you’re not sure how to calculate that, the IRS has a withholding calculator to help you decide.
Smart money managers, by the way, recommend you aim to come out even at the end of the year. Otherwise, they say, you’re just giving the government an interest-free loan.
Other people use their withholding as a kind of forced savings account, and use the money they receive in April to pay down bills, take a vacation, or spruce up their homes. That’s fine if that’s the only way to make yourself save money, but remember that you don’t make any interest that way. If you can force yourself to put the difference into a high-yield savings account or money market fund, for example, you could be making interest on that money.
2 Start Keeping Receipts
If you don’t already do so, start keeping receipts for things you can deduct next year. This includes medical expenses, charitable donations, and business expenses if you’re self-employed. It just takes a minute to drop things into a folder, and come next April you won’t be trying to recreate your entire year from memory.
Be sure to keep all these receipts together, whether in a physical location such as a file, or on your computer or in the cloud.
3 Review Your 401(k) and HSA
Review your 401(k) or other retirement vehicles you may have and try to increase your contributions as much as possible. Remember, this money is set aside before you pay taxes on it, thus reducing your adjusted gross income before you even consider other exemptions or deductions.
Health Savings Account (HSA) contributions work the same way: All contributions are made in pre-tax income. So if you expect to have large medical bills this year—if you’re pregnant, or contemplating elective surgery, for example—try to put as much into your employer’s HSA as you can afford.
4 Learn the New Tax Law
Learn all you can about the new tax law. One reason people were so blindsided by their tax bill this year is that so many traditional deductions disappeared. Here are a few:
property and local income taxes (known as SALT, or state and local taxes)
personal exemptions (last year, $4,050 for yourself and each family member)
the interest on home equity loans
moving expenses
job-related expenses such as mileage, professional fees, entertainment expenses, etc.
charitable contributions (unless you itemize)
tax preparation fees
The standard deduction has doubled, but for those who choose to itemize it may not make up for the loss of deductions in these other areas.
And whatever you need money for, let the professional negotiators at Billshark find it for you. Remember, it costs nothing for you to let us make the attempt.
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Frequently Asked Questions
When should I start preparing for next year’s taxes?
Right now. Even though tax season is behind you, anything you do—or fail to do—during the year will impact your tax return next April. Taking steps now, such as adjusting your withholding and saving receipts, gives you the whole year to lower your tax bill and avoid unpleasant surprises down the line.
How do I adjust my tax withholding?
If you didn’t receive a refund, you now know roughly how much you need withheld from each paycheck to avoid owing next April. If you’re not sure how to calculate it, the IRS has a withholding calculator to help. Smart money managers recommend aiming to come out even at year’s end, rather than giving the government an interest-free loan.
Which receipts should I keep for tax deductions?
Start keeping receipts for things you can deduct next year, including medical expenses, charitable donations, and business expenses if you’re self-employed. It takes just a minute to drop them into a folder. Keep them all together, whether in a physical file or on your computer or in the cloud, so you’re not recreating your year from memory in April.
How do 401(k) and HSA contributions lower my taxes?
Money you put into a 401(k) or other retirement vehicle is set aside before you pay taxes on it, reducing your adjusted gross income before other exemptions or deductions. Health Savings Account contributions work the same way, made with pre-tax income. If you expect large medical bills, try to put as much into your employer’s HSA as you can afford.
Which deductions disappeared under the new tax law?
Many traditional deductions vanished, including property and local income taxes (SALT), personal exemptions, interest on home equity loans, moving expenses, job-related expenses, charitable contributions unless you itemize, and tax preparation fees. The standard deduction has doubled, but for those who itemize it may not make up for the loss of deductions in these other areas.
4 Ways To Prepare Now for Next Year’s Taxes page context
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Prepare for next year's taxes now: adjust your withholding, save receipts, boost 401(k) and HSA, and learn the new tax law. Start cutting your bill today.
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Billshark publishes this information to help visitors make informed decisions about recurring expenses and related account actions.
Tax season is behind you, but the smartest time to lower next year’s bill is right now.
It’s May, tax season is behind you, and the last thing you want to think about is going through that again.
Anything you do—or fail to do—in 2019 will impact your tax return next April, so reviewing these tips now could save you anguish down the line.
The most important step you can take is to adjust your withholding.
Smart money managers, by the way, recommend you aim to come out even at the end of the year.
Other people use their withholding as a kind of forced savings account, and use the money they receive in April to pay down bills, take a vacation, or spruce up their homes.
If you don’t already do so, start keeping receipts for things you can deduct next year.
Be sure to keep all these receipts together, whether in a physical location such as a file, or on your computer or in the cloud.
Review your 401(k) or other retirement vehicles you may have and try to increase your contributions as much as possible.
Health Savings Account (HSA) contributions work the same way: All contributions are made in pre-tax income.
Learn all you can about the new tax law.
The standard deduction has doubled, but for those who choose to itemize it may not make up for the loss of deductions in these other areas.
And whatever you need money for, let the professional negotiators at Billshark find it for you.
Right now.
If you didn’t receive a refund, you now know roughly how much you need withheld from each paycheck to avoid owing next April.
Start keeping receipts for things you can deduct next year, including medical expenses, charitable donations, and business expenses if you’re self-employed.
Money you put into a 401(k) or other retirement vehicle is set aside before you pay taxes on it, reducing your adjusted gross income before other exemptions or deductions.
Many traditional deductions vanished, including property and local income taxes (SALT), personal exemptions, interest on home equity loans, moving expenses, job-related expenses, charitable contributions unless you itemize, and tax preparation fees.
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