Tax Returns - Key Considerations for Working Individuals

As the tax season approaches, it’s essential for working individuals to stay informed about recent changes to ensure accurate and compliant tax returns, potentially maximizing refunds. Here are key considerations to keep in mind:

Income Reporting: Accurately reporting all income sources is foundational. This includes wages, self-employment earnings, interest, dividends, and more. Gather all relevant income documents, like W-2s and 1099s, to ensure they reflect your actual earnings for the year.

Deductions and Credits: Maximizing deductions and credits can significantly reduce your tax liability:

• Deductions: Consider itemizing if your deductible expenses—such as mortgage interest, charitable contributions, and medical expenses—exceed the standard deduction.
• Credits: Explore available tax credits, like the Earned Income Tax Credit and the Child Tax Credit.

Filing Status: Your filing status significantly impacts your tax obligations and benefits. Options include single, married filing jointly, married filing separately, or head of household. Choose the status that best reflects your situation to maximize tax advantages.

Tax Withholding and Estimated Taxes: Review your tax withholding to ensure it aligns with your expected tax liability. If you’re self-employed or have additional income sources without tax withholding, you may need to make estimated tax payments to avoid underpayment penalties.

Retirement Contributions: Contributions to retirement accounts offer tax benefits and enhance long-term financial security. For 2025, the contribution limit for 401(k), 403(b), and most 457 plans have increased to $23,500. Catch-up contributions for ages 50-59 are $7,500. Additionally, individuals aged 60 to 63 have a higher catch-up contribution limit of $11,250.

Healthcare Coverage: Ensure you report your health insurance coverage accurately on your tax return or claim any exemptions for which you qualify. Compliance with healthcare coverage requirements remains essential to avoid potential penalties.

State and Local Taxes: Review your state and local tax obligations in addition to federal taxes. Depending on your residence and workplace, you may have income taxes, property taxes, or other liabilities that need to be accounted for in your tax return. Also, stay informed about recent tax law changes that may impact your return. For instance, the proposed Tax Relief for American Families and Workers Act includes provisions affecting both individual and corporate taxes.

Documentation and Record-Keeping: Maintain thorough records of all income, expenses, deductions, and credits claimed on your tax return. Organizing your records throughout the year can streamline the tax filing process and ensure accuracy. Before submitting your tax return, carefully review it for any errors or discrepancies. Even minor mistakes can lead to processing delays or trigger IRS inquiries. Double-check all entries and calculations to minimize the risk of errors. By considering these updated factors for the 2025 tax year, you can ensure a more accurate and beneficial tax filing experience.

Access a guide of key financial data for 2025 here.

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