Many Americans build their wealth by saving their income, investing in the stock market, keeping their discretionary spending low and avoiding debt. But some may fail to take full advantage of their tax benefits as a method of boosting their wealth. However, analysts encourage Americans, namely retirees who are nearing their golden years, to take a step back and determine how they may benefit from their taxes.
For example, experts say older adults should try to determine, in advance, if they will be receiving a tax refund the following tax year. Those who are unsure or believe they will not receive money back should explore their current financial situation and determine ways to lower their tax liability. Consumers should make sure they are not having too much money withheld from their paychecks as a first step.
In addition, individuals should run through the list of credits and deductions they claimed last year and determine if they will still be eligible to claim them again during the following filing season. As circumstances change, the tax benefits a consumer qualifies for may also change. Some credits may no longer be applicable, while individuals may be eligible for others. Keep a running checklist of these benefits to avoid missing out on money-saving benefits at tax time.
Many older adults have more money invested in stocks, bonds and other wealth-building vehicles, so individuals may want to review their portfolios against their taxes, according to MarketWatch. Experts say asset re-allocation may help consumers reduce their capital gains tax in the future. However, moving assets and diversification may warrant the help of a professional, so consumers should make sure they fully understand their actions and the tax ramifications of each change, the news source said.
Lastly, adults over 50 should start taking advantage of catch-up contributions, which allow them to contribute more than the maximum to their retirement accounts. For example, individuals may contribute an additional $5,500 to their 401(k)s for 2010 and 2011.
Experts say that due to the complexity of tax codes and the evolving laws and regulations being introduced, Americans should consider going over their taxes with a tax preparer
or professional to make sure they understand their returns. Being aware of how their taxes are assessed by Uncle Sam may help them make financial changes that will lower their liability in the future.
Liberty Tax Service
provides computerized income tax preparation
and electronic filing. Each tax office
offers customers audit assistance, a money back guarantee, and free tax return checking.