We’ve reached the halfway point of the year, as well as the beginning of the new tax year. So this month, we’ll focus on getting yourself ready for the next tax year and making filing your taxes a lot simpler. Remember, It’s always easier to prepare yourself before, instead of scrambling at the end of the year.
Step 1 – Stay Organised
It’s not just the law that requires keeping receipts, but it definitely makes tax returns a lot easier. Instead of just stashing your receipts into a shoebox, make your life significantly easier by organising your expenses with a digital system.
With Wally, you can tag your expenses by experiences- whether it is people you know, aspects (work, family, social), categories and much more. So when it comes time to doing your taxes, just review your expenses in Wally, and you’ll have an itemised list for any deductions you need to file. You can also take pictures of any receipts and save them into Wally for easy identification. No more trying to understand if that faded receipt was for $94 or $34!
Step 2 – Be Charitable
Did you know, every donation over $2 made to a registered charity is tax deductible? Tag any charitable expenses with Charity as a category, so you can review them at the end of the year.
For ‘bucket donations’, you can claim a deduction equal to your contribution, up to $10, even if you don’t have a receipt. It pays to give back!
Step 3 – Plan Ahead
Review your tax bracket based on your income. If you’re thinking of making a large purchase and your income might push you into another tax bracket, then make the purchase now. This will lower your taxable income and might even move you down into a lower tax bracket.
Alternately, if you’re expecting an income from an investment, delay this to after the start of the next tax year. It might be too late this year, but these changes can allow for significant savings in the upcoming year.
Step 4 – Think about Work Expenses
Work-related expenses can qualify for a deduction. This includes any work calls made from your personal cell phone, purchasing equipment or insurance for work, or making use of your home office. Break down your expenses by hours/days used for work purposes to claim major tax savings.
For Example:
$68 per month for mobile phone plan
25% of calls are work related for 11 months the year
$68 * 25% * 11 = $187 tax deduction
Step 5 – Start Afresh
Preparing a tax return is a great time to review your finances. Are you overspending in a certain category? Or are your investments doing really well? Use this opportunity to clean up any pending actions and make smart financial decisions to start the next year off on the right foot.
As always, get proper advice by visiting the tax office, reviewing the taxation website and speaking to a professional. Don’t forget, the deadline for submitting this year’s return is 31 October 2015.
Saeid Hejazi is the CEO and founder of Wally – a personal finance app available on iOS and on Android as Wally+. Download now