taxes are a necessary evil that you may want to leave to the professionals but there are some basics you can use to minimize the amount of taxes you will have to pay. When planning for your taxes you may just think of the April 15th due date but you are required to pay taxes throughout the year. Paying the right amount throughout the year will save you on penalty charges for underpayments.
For most people the payments throughout the year are made on our behalf by our employers. Employers withhold taxes automatically from your gross earnings before giving you your net earnings. You probably have noticed these numbers on your paychecks. Your employer has to report your total income and taxes paid by submitting a W-2 form to the IRS. Then you must file your taxes, the W-2 form tells you have much you have already paid in taxes so you can either pay the difference or collect the difference.
Throughout the year you can take certain steps to stay organized and ready for filing your taxes. The first step is to keep everything organized. Using personal finance software to enter and maintain accurate records. Keep records of expenses like automobile mileage incurred for business purposes, charitable contribution receipts, etc. Also you need to maintain accurate stock purchase and sale records.
Also contributing the maximum to your 401(k) retirement plan will allow you to defer your taxes that you would have spent on these contributions. Adjust your withholdings if your marital status changes or if you are in a different tax bracket. If sufficient funds are not withheld from your paychecks, or if your are self-employed and you do not make appropriate estimated tax payments you may be charged year-end penalties.