It’s that dreaded time of year once again-tax time. You hunt for receipts for scrubs and the tools of your trade, travel, and loan payments. You curse the mess of paper and lost payment records and you vow to do better next year. There has to be a simple way to get through tax time.
Of course the best way to simplify tax time for anyone is to be ultra-organized. Don’t just jam receipts into your purse but take them home, put them in a file and store in a safe place until the next April rolls around. Get up-to-speed on the latest tax laws, especially for healthcare workers, and maybe look into a tax preparation service.
While all of those ideas can certainly work to your favor by simplifying next year’s taxes,, you need some advice here and now. April’s deadline looms large and you are beginning to feel slightly (OK-big time!) overwhelmed. Here are 5 ways to simplify tax time for healthcare workers:
Understand the Kind of Taxes Your Pay
No matter how much you want to avoid the whole tax time angst, you can’t. It’s time to face down your tax fears. Begin by understanding the type of taxes you pay.
Everyone pays federal income tax , and state, local income taxes-to varying degrees, depending on where you live. All employees are required to pay Social Security and Medicare taxes as well. If you’re wondering what you pay, check the W-2 sent to you by your employer. If you have any questions or concerns regarding your W-2, seek assistance and answers from your employer’s HR department before preparing your tax return.
Those healthcare workers who are self-employed are required to pay double in Social Security and Medicare to cover both employer and employee contributions. You’ll need to verify your status-whether you’re considered an independent contractor, or an employee of a healthcare facility before you file your taxes.
Find Ways to Bring Down Your Tax Bill
The easiest way to offset the amount you owe the government is to itemize your deductions. Before you dismiss itemizing as too much work and not enough payoff to make a difference, consider these common deductions for healthcare workers at tax time:
Charitable Contributions
Volunteer-related travel expenses
Loan Interest
Tax Preparation Fees from Tax Year (previous year)
Child or Dependent Care
Expenses Incurred While Seeking Employment
Moving Expenses, if relocation is a condition of the job
Tools and Supplies necessary to job
Scrubs, or Other Special Clothing and Shoes
Protective Wear (safety glasses, specific shoes, etc)
Cost of Specific Education Required to Perform Your Job
Training Costs to Upgrade Skills
Professional License
Professional Dues for Organizations Related to Job
Union Dues
Unspecified Expenses related to Job Performance (check with tax preparer)
There are many more deductions your tax preparation service will advise you of, but, as you can see your itemized deductions will likely outweigh the “standard deduction” on your 1040 federal return.
In addition to itemizing your deductions, many employers will deduct your IRA, or 401K contributions, as well as your health savings account contributions from your gross income, as a means for levying your taxable income. Depending on your contributions, this could help significantly lower the amount of income on which you will be taxed.
Find Tax Credits
Tax credits can lower your taxable income dollar for dollar. Healthcare employees, especially nurses, can offset their taxes by taking advantage of the education credits. Depending upon your specialty, you can deduct all education and training expenses, so keep track. Additionally, you can take tax credits for dependent care and child care. If you’ve made certain home improvements that cut your energy usage, energy tax credits can be applied. For those in the lower-to-middle income bracket, you may qualify for an earned income tax credit.
Are You a Travel Nurse
Travel nurses can deduct quite a bit of their expenses-even their living expenses. If you are a travel nurse, it would behoove you to seek the help of a tax preparation service. You will offset your taxable income significantly.
Get Professional Help at Tax Time
For most of us, it seems the tax codes and jargon are written in a language all their own. Seek help from those who fully understand the way of tax time. CPA’s and licensed tax preparation specialists are optimum for getting you the most in deductions and credits. They have to be up on all the latest tax laws, so you won’t risk getting in trouble with the IRS.
There are also some very efficient online tax software applications available to you. These are usually pretty good at simplifying tax time. And they cost much less than an accountant. But, if your taxes are the least bit complicated consider hiring a tax professional.
Its impossible (legally) to get out of paying what you owe to the IRS. There are ways, however, to simplify the process and allow you to keep more of your earnings. Begin by implementing the above steps to reduce your tax burden-financially, mentally, and emotionally-and you’ll dread tax time less starting now.
