Trying to Scale up Tax Refunds? Here are Tips to Follow While Filing Your Returns

Doing taxes can be a hassle for many as the financial year comes to an end, since it involves grappling with the complexities of the tax code. One of the major problems people face while filing ITRs is that they end up paying a lot in taxes while securing minimal refunds. This phenomenon can be attributed to various factors that range from changes in personal circumstances to misconceptions and tax planning intricacies. But taxpayers can reduce their tax bills and maximize refunds using simple tactics. 

Last-Minute Tax Saving Options

With just two weeks left for the federal tax deadline to approach, experts have instilled some hope that taxpayers have a chance to lower their tax amount and increase their refunds. At the verge of year-end, it becomes difficult to pretax 401(k), charity donations, or reduce investment profits with tax-loss harvesting. Financial experts have suggested these three tax-saving options which the public can leverage before the deadline.

Filling up or pre-taxing your individual retirement account (IRA) is one of the finest options to save taxes as it lowers your total income slab. As per Mark Steber, CTI officer at Jackson Hewitt recommends saying, “They’re still very popular and it’s just good planning". You can still make adjustments as the 2023 tax season deadline is approaching. For 2023, you can stack up tax savings up to $6,500, or $7,500 if you're 50 or older.

This contribution can give you an immediate tax deduction, even if you don't itemize deductions on your tax return. Tommy Lucas, a certified financial planner told CNBC, “Typically, if you’re in the 10% or 12% tax bracket, you’re probably better putting money into the Roth IRA". Although a Roth IRA doesn't give you the tax benefits upfront but can definitely compound your tax-free money.

Another option for married couples are spousal IRAs, which allow a working spouse to make strategic contributions to a Roth IRA in the name of their non-working spouse. CFP Laura Mattia, CEO of Atlas Fiduciary Financial disappointingly says, “They are underutilized. People don’t always think about them". The contribution limit is this IRA goes up to $7,000 annually and both of them can make their contributions up to the limit, as long as the working spouse earns enough income. But the catch here is, before making any big investment it is crucial to examine your goals and the tax implications thereof. 

One more option for lowering your tax bills is the HSA or Health Savings Account. Steber recommends scoring a last-minute deduction with a 2023 health savings account contribution by the tax deadline, which offers a “multitude of benefits” — assuming you have a high-deductible health insurance plan. Contributing to HSA can offer the taxpayer three major benefits, including contribution deductions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Individuals can contribute up to $3,850 for personal coverage whereas for family they have to make an investment of  $7,750.

These major tax saving strategies are can prove to be game changers at a time when more than $1 billion in tax refunds are still unclaimed in the US.