Tips For Tax Time
Tax Time is Coming Up!
Well, it's almost that time of year again. With less than 2 weeks to go the rush is on to get them done on time. You need to file your taxes, and you need to not raise red flags or draw the attention of the IRS to anything. Nobody likes it any better than you do, but it's got to get done and the best you can hope for is for it to be as quick, easy and painless as possible.
• Filing online. The IRS has teamed up with nineteen different software companies to make tax preparation free (or at least low-cost) for most Americans. The chief benefit of filing online, of course, is the fact that the information gets to the IRS right away. You'll need to start at the IRS' Free File Page, but you can have your choice of TurboTax, H & R Block's Tax Cut, TaxAct, TaxEngine, TaxSlayer, Complete Tax and several other systems. They all have varying degrees of accuracy, ease and speed. Do your homework online to determine which one you might want to use.
• Be prepared. Whether you're filing on your own or having someone else prepare your taxes, make sure you've got your ducks in a row. At the very least, you're going to need your W-2's and 1099s, Social Security statement and IRA or 401k papers. Other documents might include things like dividend and interest statements (1099-DIV and 1099-INT), brokerage statements (1099-B), proof of jury duty pay, proof of alimony or child support or your income and expense records for self-employment. If you're deducting, be ready to back that up with statements of health care expense, real estate taxes, job-related expense, motor vehicle registrations, gifts to charity, etc. The more prepared you are, the more thorough you can be. The more thorough you can be, the less of a chance the IRS will flag your return.
• Use the simplest form for your needs. For most taxpayers, that's going to mean the 1040EZ. Income under $100k? Interest income under $1500? Under 65? Single or married and filing jointly? Standard deduction? Earned Income Credit? Then 1040EZ is the form for you. 1040A is the form for common adjustments like IRA contributions, penalty for early withdrawal of savings, student loan interest, or tax credits for child care, retirement savings contributions or education credits. Remember, though, that 1040A is not the form to use if you want to itemize your deductions. Itemized deductions will require the 1040 "long form." Even though longer and more detailed to complete, the 1040 long form can accommodate about any tax situation. The idea is to not make things any more complicated or difficult for yourself than they need to be. The IRS realizes this, and that's exactly why several different forms are available for different taxpayer needs.
• Claim yourself and dependents as exemptions. Claiming yourself as an exemption reduces your taxable income, and your tax liability. Remember, though, that if anyone can claim you as a dependent, you cannot claim yourself as an exemption. The personal exemption amount is reviewed annually and indexed for inflation. The tax code on exemptions changes somewhat over the years, so be sure you do your homework first and know the current rundown on it.
