Tricks to Save Money On Taxes

If you have fairly simple taxes, that is ones that do not include several complicated schedules or worksheets that have to be filed, then you might not want to pay for TurboTax or TaxCut or other tax preparation software.  But you still don’t really want to go it alone without some sort of double-check.

Let’s jump right in with some tricks to save money on taxes.

TurboTax For Free

TurboTax offers a marketing gimmick where they allow you to do your taxes on the online version of TurboTax for free.  You only have to pay when you print or e-file your return.  But who says you have to print anything?

When you have finished inputting all of your information, and TurboTax has finished crunching all of the numbers, switch to the form view where you actually are looking at an electronic version of the tax form.  Copy the numbers down onto Form 1040 that you printed off of the IRS website, and voila.  Your taxes are done, and all for free!

Obviously, if you have to generate a bunch of extra paperwork or IRS Schedules, this isn’t the method for you.  But keep in mind that many of the worksheets that TurboTax fills out with their program are not for filing, but rather just for the taxpayer to use and keep.  So, don’t let those throw you off.

If you are just filing a Form 1040 and a Schedule A (Itemized Deductions) then you are just fine.  Even a Schedule C (Business) is not a problem so long as you have a simple one-person operation that you run out of your home.

Anything much more complicated than this is probably a little too much to trust that you are going to get all of the right forms filled in and put together.  But this trick should cover about 80% to 90% of the people who do their taxes without a professional.

A double bonus tax trick is to check your state’s Department of Revenue website. Chances are that they let you do your taxes online for free. All you need is some of the numbers from your federal income tax return, so keep that 1040 handy.

Another Tax Savings Trick or Tip

There really are no tax tricks.  There are only taxable items, non-taxable items, and tax deductions.  The trick to lowering your taxes is to make sure that you make all three categories work for you.

tricks to save money on taxes

One area where many people could use a tax tip to lower their taxes is in the realm of tax deductions.  For example, traditional IRA contributions may be taxable. You see, most tax deductions are simply set in stone, either you get them, or you don’t.  You really can’t go around trying to get them.  For example, going to college to get a college tax credit doesn’t make any sense.  If you are going to college, then of course you would claim the credit.  But that is the point, either you already are getting it, or you are not.  There is no trick.

So, then what are we doing here?

The exception to this rule is owning your own business. Having a business is one of the best tricks to save money on taxes.  With your own business, you get to file a Schedule C and on Schedule C, there are literally hundreds of things that become tax deductible that are not deductible on your taxes anywhere else.

Too late to start a business to lower your 2022 taxes? 

Technically, yes, but that doesn’t mean there is no money saving tax trick here.  Look back over your 2022 and see if there is somewhere where you can demonstrate a legitimate profit motive.  That is, are there activities that you engaged in during 2022 that you could legitimately look someone in the eye and say, “I did that to make money.”

If so, then you have a business.  Combine all of those up into a single grouping, and maybe you even have a profitable business.  Now, virtually everything you did in order to make money on those activities, from purchasing new office supplies or equipment, to milage driven to look at something you needed, to meals eaten out with others who could help make your business profitable all become profitable.

Don’t worry if you were not profitable in 2022.  Most businesses are not profitable in their first year.  In fact, most businesses are never profitable because 2/3 of them fail within the first three years.  That doesn’t mean you can’t claim your deductions.

Obviously, I can’t cover every detail here in just 500 words, but the most important factor is that your business must have a profit motive.  That means that you have to be trying to make money at it.  Just making money on accident doesn’t count.  But, if you are fixing up old toys and selling them on eBay for more money than you bought them for, that is a profit motive.  And you can deduct every expense associated with it, from shipping, packaging, to tools, supplies, advertising, even all the costs associated with your web site or PayPal account.

You don’t even have to have kept receipts since many of those expenses are probably waiting for you in your email inbox as invoices and bills, plus your PayPal account history.  Also, check your credit card statements.

Print them all off, stick them in your tax folder, and fill out Schedule C. Who knows, you could save hundreds or thousands of dollars on your taxes for 2022.  And, as a double bonus, it might save you money on your 2023 taxes too!

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