You’ve probably heard the phrase “the more you save, the more you can keep.” You’ve probably seen ads or watched television that feature a catchy catchphrase. If you want to save on your taxes, you’ve got to follow these tips. Using deductions to lower your taxes is essential because it increases your disposable income. Fortunately, most of these mistakes are simple enough to avoid.
One common mistake most taxpayers make is delaying tax planning until the end of the financial year. However, you should begin your tax planning process as early as possible. You can make your investment decisions early in the financial year, allowing the money to accumulate tax-free interest throughout the year. This is particularly beneficial when you invest in a PPF account, which will earn you higher tax-free interest throughout the year.
Another common mistake is investing too late to maximize tax savings. Many taxpayers wait until the end of the financial year to invest in tax-saving instruments. This rash decision results in a poor investment choice and a financial burden for the taxpayer. Ideally, tax saving investments should be part of your financial planning and make sense for your financial goals. With proper planning, you can choose the right mix of tax-saving and non-tax-saving products that will maximize your savings.
The biggest tax saving mistake of all is focusing on Section 80C tax benefits alone. Instead, you should explore other tax saving avenues. Consider investing in long-term fixed deposits and national saving certificates, which are both tax-deductible. The interest you earn on these accounts is taxable. You can avoid this mistake by diversifying your investments with a wide variety of products. So, make sure you know about tax savings strategies that work for you.
A common tax mistake is failing to review your W-4 form regularly. This simple step is usually neglected by individuals. Ideally, you should check your W-4 form half-way through the year. Incorrect numbers can lead to big problems. It’s also a hassle to amend an inaccurate return. So, before filing your returns, always review them thoroughly. There is no excuse for neglecting this simple step.
Another common mistake is math. Doing math incorrectly can result in an immediate correction notice. The mistake could cost you up to $648 more in taxes. Don’t fall victim to math mistakes. Even simple addition and subtraction mistakes can lead to a large tax bill. Make sure you double check your calculations. You can also opt for tax-preparation software, which automates the entire process.