Seeing Green, It's Tax Time
By Crystal Rivenbark, FIC

April 15 is right around the corner. Are you prepared? The thought of tax time is enough to send some people into a state of panic. Many people choose to ignore the calendar and live in the land of denial, while others are so eager to finish, they spend the first weekend in February completing tax forms. While tax time can be quite scary and frustrating, there are a few things you can do to make sure you “see green” at the end of this tax season.
Adjust Your Claims

How many dependant do you claim on your taxes? If you are married with children, chances are you are claiming yourself, your spouse and each child. This is an attractive way to fill in your W-4, because the more dependents you have, the less money your employer will take out of your paycheck for taxes. This can be problematic for some individuals because they frequently owe the Internal Revenue Service (IRS) money at the end of the year. To increase your chances of getting a refund, adjust your W-4 by asking your employer to withhold taxes at a higher rate. It is true that you will see a decrease in the amount of your take-home wage, but the payoff comes when you don’t have to write a check to the IRS at the end of the year.

Maintain Good Records
This helps not only at tax time but the rest of the year too. Use a good filing system and keep all pertinent tax information in one location. Keep receipts for supplies, travel and other business expenses separate from your other records. If you own a business, be sure to write down the purpose for the deduction at the top of each receipt. The IRS requires you to keep receipts for a minimum of three years. Have you noticed that some receipts have disappearing ink? Be sure to photocopy receipts to ensure proper documentation. This will help if the IRS selects you for an audit. Oftentimes, insurance, personal property taxes and other business administration fees are applicable to your taxes, so be sure to include copies of those items with your tax records. I recommend a basic accordion file with tabs divided by month. Remember, the more simple the system, the more likely you are to use it.

Seek Deductions
Visit the IRS Web site at IRS.gov to view a list of common deductions. Don’t depend on your tax advisor to know about all your qualifying deductions. Not all tax advisors are created equal. Although there are a lot of good tax preparation software programs available, not all advisors use such programs. You will need to meet with your advisor and make sure he or she is aware of your financial status. If you are savvy enough to complete your own tax forms, use a computer software program instead of putting ink to paper. These programs will ask questions and use your responses to determine if you qualify for deductions. If you must use a tax preparer, make sure to select one who will take the time to go over a complete list of deductions. Missing even one deduction can make a big difference in the amount of your tax liability.

Contribute to an Individual Retirement Account (IRA)
If you aren’t maximizing the amount of money you contribute to an employer-sponsored tax-qualified retirement plan, consider contributing more. Many employers will match the amount contributed to the plan up to a prespecified percentage of your annual income. If you aren’t adding at least the amount your employer will match, you’re giving money away. You wouldn’t tell your boss you didn’t want a raise, right? Neglecting to contribute at least the matchable amount to your retirement plan is the equivalent of turning down a raise.
If you are self-employed or if your employer does not offer retirement plan options, open your own IRA. Be sure to set up your plan in such a way that funds are contributed on a pretax basis. Your tax advisor can tell you how much tax liability you can eliminate by starting such a plan. Avoiding IRA contributions has a negative impact on your ability to retire comfortably. Saving large amounts of money now may seem difficult, but waiting will make saving money more difficult as you age. Consider this: you will write a check one way or the other. Would you prefer to write a check to yourself or to Uncle Sam?

Don’t Procrastinate!
Most of us go through life depending on our advisors to “take care” of all the complicated business associated with life. It is much easier to hand over our records and just write or collect a check once the tax forms are filed. This is a mistake, because what you don’t know can cost you money. Do your research and take the time to educate yourself about your options. The best way to “see green” this tax season is to play an active role in your own tax preparation process.

The preceding information should not be substituted for professional legal or tax advice.

Crystal Rivenbark has been a stylist since 1992 and a cosmetology instructor since 1996. She earned her insurance licensure in 2004 and obtained her Fraternal Insurance Counselor designation in 2008. Crystal began specializing in business development for salons and spas shortly after when she founded Hair Architecture, LLC. She currently works behind the chair, travels as an educator and works with salon and spa owners to provide them with a road map for success. For more information about the upcoming tax season, contact Crystal at hairarchitecture@gmail.com.