How to get a bigger tax refund in 2017


Tax season is around the corner, which isn't welcome news to many people. It should be, though, as roughly 80% of the nearly 150 million individual tax returns processed by the IRS end up with a tax refund, the average size of which is roughly $3,000. Better still, there are things you can do to get a bigger tax refund -- in 2017 and beyond.

Here are a handful of ways to get a bigger tax refund. See if any of them might work for you.

Take lots of deductions

One way to boost your tax refund is by taking lots of deductions. Taking the standard deduction is easier, but you might be able to save money by itemizing your deductions. If you don't really have enough in deductions to make that worth it, see if there are any deductible expenses you can move forward from 2017 to 2016. For example, if you've been planning to donate to some charities in the next few months, doing so in December can have them count for tax year 2016. (You can also donate household items and clothing to charity.) If you know you have qualified medical expenses such as Lasik surgery or lab work coming up, you might try to move them up to December, too. Read up on deductions as there are many that might apply to you, such as expenses related to moving for a new job.

Refinance your mortgage

Interest rates seem more likely to rise than fall these days, so take some time to see whether it makes any sense to refinance your mortgage. Most of your monthly payment goes toward interest in the first years of a mortgage, and that interest is deductible. Don't just refinance for the tax break, but refinancing could be smart if you get a meaningfully lower interest rate (one rule of thumb suggests only refinancing if you can get a rate that's at least one percentage point lower) or if you switch into a loan that serves you better, such as a 15-year mortgage.

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Guide to commonly-used US tax forms
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Guide to commonly-used US tax forms

The 1040 family of tax forms is for federal income tax and is absolutely essential for all.

The 1040EZ form is the simplest version and is typically filed by those who:

  • Have no dependents
  • Are younger than 65
  • Earned less than $100,000
  • Don’t plan to itemize deductions

Form 1040A is more comprehensive than 1040EZ, but simpler than the regular 1040. It's beneficial for those who earn less than $100,000 and don’t have self-employment income -- but who want to make adjustments to their taxable income, such as child tax credits or deductions for student-loan interest. Note that it doesn't allow for itemized deductions.

Form 1040 is filled out by those who make $100,000 or more, have self-employment income or plan to itemize deductions.

The W-2 is completed by employers document each employee's earnings for the calendar year. You will want to take a look at this tax form for important information you'll need to fill out your 1040, 1040A or 1040EZ. 
The 1098 form is filled out by those who:
  • paid interest on a mortgage
  • paid interest on a student loan 
  • paid college tuition
  • donated a motor vehicle to charity

The 1099 series is reports all income that isn’t salary, wages or tips, and must be reported on both the state and federal level.

1099-DIV reports dividends, distributions, capital gains and federal income tax withheld from investment accounts, including mutual fund accounts.

1099-INT trakcs interest income earned on investments.

1099-OID (Original Issue Discount) is provided if you received more than the stated redemption price on maturing bonds.

1099-MISC documents self-employment earnings, as well as miscellaneous income such as royalties, commissions or rents. It covers all non-employee income that is not derived from investments.

If you receive a refund that you're unable to pay in full, you can request a monthly installment plan using Form 9465.
Don't forget to notify the IRS if you move! Use Form 8822 to change your address with the Internal Revenue Service. Otherwise, notices, refunds paid with a paper check and other correspondence relating to your personal, gift and estate taxes will be sent to your former address.
Anyone who has been employed by a company has completed a Form W-9. The W-9 is used by employers for payroll purposes -- and the information on the W-9 is used to prepare employee paychecks during the year and W-2 forms at the end of the year. 
The W-4 is an IRS form completed for employers know how much money to withhold from your paycheck for federal taxes. Accurately completing your W-4 can both ensure you don't have a big balance due at tax time and also prevent you from overpaying your taxes.
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Save for retirement

Most of us need to contribute to retirement accounts, and if we contribute to a traditional (not Roth) IRA and/or 401(k), we get to deduct that sum from our taxable income, shrinking our tax bill and making our refund bigger. It's a no-lose proposition. Still, it might be even better to contribute to a Roth IRA or Roth 401(k) instead. They won't give you any upfront tax break and won't enlarge your refund, but they do offer the promise of withdrawals in retirement that are tax-free. That's well worth considering.

Claim fewer allowances on your W-4 form

We all fill out W-4 forms when we first start a job. However many allowances you claim determine the amount withheld from your paycheck for taxes. The more you claim, the less will be withheld. There's a worksheet with the W-4 form that helps you determine how many to claim, including taking one each for yourself, your spouse, and qualifying dependents. You can add allowances if you work more than one job, have a spouse who works, and have significant child and dependent care expenses. You get to choose how many allowances to claim and you can update your W-4 form any time, so claim more if you want a fatter refund check by submitting a new W-4 form to your payroll department.

Choose the correct filing status

Your filing status influences the size of your tax refund, too. Don't assume that just because you're unmarried that you should file with the "single" filing status. If you're a single parent or support a dependent, you may qualify for the "head of household" status, which offers more favorable tax rates and a significantly higher standard deduction. (For 2016, for example, the standard deduction for singles and married folks filing separately is $6,300, but it's $9,300 for heads of households.) Meanwhile, if you're married, run the numbers to see whether you're better off filing jointly or separately. Filing jointly is more likely to result in a bigger refund, but everyone's situation is different. Filing separately can make sense if one spouse has high medical expenses or if the marriage is rocky.

Take the Earned Income Tax Credit (EITC)

If you earn relatively little, the EITC can shrink your tax bill and boost your refund considerably. For the tax year 2016, the maximum credit is $6,269, and the average credit that qualifying folks take has recently been around $2,400. The EITC is very powerful but underused. Look into it to see if you can take advantage of it.

Hire a tax pro

Finally, consider hiring a tax pro to prepare your return and offer strategies to you. Yes, it will cost some money -- possibly a few hundred dollars for a good pro -- but you may well reap much more than that in tax savings and a bigger refund. A good tax pro will be up on the latest tax-law changes and will know far more about the tax code than you do. Don't just hire anyone, though. Ask around for recommendations. Consider hiring an "Enrolled Agent," a tax pro licensed by the IRS who is authorized to represent you before the IRS if need be. You might find one through the National Association of Enrolled Agents website.

Any or all of the above can work to boost your tax refund, but a big refund isn't necessarily to be celebrated. It might seem like you're receiving a bonus, a windfall, or even a gift from the government, but a refund actually means that you overpaid your taxes due during the course of the year, making funds available for Uncle Sam to use that were not available for you to use. A shrunken tax bill, though, achievable with some of the strategies above, is something to celebrate.

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Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, owns no shares of any company mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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