Saving Money on Taxes: How to Do It

Reduce Your Tax Bill

One of the first steps to saving on taxes is knowing which deductions and credits you qualify for. Everything from medical expenses to charitable donations can help reduce income tax.

File an Extension If You Need One

It takes time to go through your finances, identify all of the deductions and credits you qualify for, and gather the documents you need. The good news is, if you need more time for any reason, you can automatically extend the deadline for your tax return into October. There’s no penalty as long as you file for an extension by tax day.

An extension gives you more time to file paperwork, but any estimated taxes owed are still due by the standard filing deadline to avoid interest and penalties. But it’s worth pushing the deadline if you need to. An accurate return ensures you get the maximum refund you deserve, and it's easy to do using one of the methods below:

Option 1: File form 4868 and pay any amount due.

This form asks for some basic personal information and an estimate of what you owe. You can use tax software or a professional to fill it out and submit it electronically, along with any amount due. Many companies offer this service for free.

You can also complete a paper form and send it through the mail. Enclose a check or money order if you owe additional taxes. Certified mail is recommended, because it comes with a receipt that proves you sent it back on time.

Option 2: Make an electronic payment and select “extension.”

If you owe taxes, one of the easiest ways to get an extension is by paying all or part of the amount online or by phone and choosing “extension” as your reason for payment.

It’s free to withdraw the money from your bank account using Direct Pay or the Electronic Federal Tax Payment System. There are also options to pay with your debit or credit card, usually with a fee.

Make Your Refund Count

If you receive a tax refund, it can be a great opportunity to be intentional with your money.

If your budget allows, consider setting aside a small portion to treat yourself, then think about how to best use this hard-earned money that has now come back to you.

"Ideally you want to put your tax refund to work and use it to help improve your financial condition,” says Joe Velkos, CPA, KPB Tax Director. “Before spending it, assess and determine which financial goals are most urgent."

Here are some options that could have a big impact:

1. Pay off high-interest debt.
   Free up more cash by paying down credit cards or other high-interest debt.
2. Build your emergency fund.
   Life happens, and when it does, having three to six months’ worth of living expenses is the key to avoiding new debt.
3. Save for retirement.
   Contribute to your 401(k) or IRA to get the most benefit from compound interest. The sooner you start saving, the more you’ll gain.
4. Start a college fund.
   If you’re a parent, you may want to use the money to start or add to a 529 college savings plan. Like with a retirement account, it pays to start now.
5. Save for a goal.
   Maybe you’ve been dreaming of a new kitchen or a beach vacation. “Wants” can be worthwhile uses of a refund, too. Some purchases, like energy-efficient appliances, double as an investment. 

Meet With a Financial Advisor

With a little preparation and the right support, filing your taxes is a chore you can master and even turn into a financial win.

Don’t hesitate to reach out to a tax pro who can help you maximize savings and file an extension if you need one. And if you do find yourself with a nice refund, a professional can also help you decide how to best take advantage of it.

"An experienced financial advisor can use their knowledge to help you create a financial plan tailored to you," says Velkos. KeyBank offers a range of savings and investment services that can help you get the most out of your money — in tax season and beyond.