5 Helpful Tips for Tax Time
Every year the IRS sends thousands of notices to taxpayers nationwide because of easily preventable errors.
[step-list-wrapper title=”” time=””]PLUS: 13 Things Your Tax Accountant Won’t Tell You
[step-item number=”1.” image_url=”” title=”Make no mistake:” ] Every year the IRS sends thousands of notices to taxpayers nationwide because of easily preventable errors. In these days of computer-generated returns and electronic filing, the type of mistakes may have changed: math errors, for example, are certainly less frequent now. But there are still common mistakes that a computer can’t see, so you need to be vigilant. Here are some examples:
· Social Security numbers: Wrong number, no number, and misplaced digits could really ruin everything.
· Despite the use of computers, math can still be a source for errors. Especially if you’re adding numbers on the side and inputting only the total on the return.
· If you’re filing electronically, you’ll be signing your return electronically too. But if you’re not filing electronically, make sure you sign that return.
· If you’re paying by check, make sure you sign that too.
· Make sure you’re using the right form. Using a simple form like an EZ might be fast, but be sure you wouldn’t get a bigger refund with a 1040A or 1040. [/step-item]
[step-item number=”2.” image_url=”” title=”Paying for a pro? Use them.” ] When you decide against do-it-yourself software and enlist the personal service of a pro, you may not be accomplishing much other than creating a bigger bill. If you’re going to pay a pro, ask as many questions as you can about strategies to minimize your taxes and get enough sensible, specific, actionable advice to offset the additional cost. [/step-item]
[step-item number=”3.” image_url=”” title=”Don’t agree to a tax refund anticipation loan.” ] Every year Americans take out loans on their tax refunds…and every year tax preparation companies rake in millions in interest and fees. Need your money fast? Use this simple system to get it.
· File electronically: It’s much faster than paper.
· Second, use direct deposit. Combining those two things can get you your return within 8-15 days. If everybody did this, refund loans would be obsolete.
· Third, if you’re getting big refunds, amend your W-4 to have less withheld on your paychecks. There’s an online calculator at the IRS website that will help [/step-item]
[step-item number=”4.” image_url=”” title=”Don’t let tax help overtax your budget.” ] The fact is that if you made less than $49,000 last year, you can have your taxes prepared and electronically filed by a trained volunteer without cost. If you made up to $57,000, you can use free software to prepare your taxes online and file them electronically for free. And no matter how much you made, if you’re willing to fill out online forms, you can also file free. Here’s a link to the IRS Free File website. [/step-item]
[step-item number=”5.” image_url=”” title=”Let Uncle Sam help you pay off $5,000 of debt.” ] According to the IRS, the average American gets a tax refund of $2,400, which means the average American is over-paying their taxes by about $200 per month. The average American also carries a balance of close to $5,000 on high interest credit cards. Here’s how to use your tax refund to help destroy your debt.
· Take your tax refund for 2009 and apply it directly against your credit card or other debt. If you’re the average taxpayer, that should amount to $2,400.
· If you’re not expecting your income tax situation to change this year, head to the IRS withholding calculator. See if you can get a bigger paycheck by legally increasing your personal exemptions, thus having less withheld.
· File a new W-4 with your employer and get a fatter paycheck.
· Put every dime of that new-found wealth against your debts. If you’re the average taxpayer, that should amount to $200 a month.
Grand total? $4,800 less debt in 12 months with little sacrifice, because you’re essentially using money you were already putting aside; you just stopped lending it interest-free to Uncle Sam and started using it for a higher purpose. [/step-item]
And here’s a bonus tip: Every year some of us wait until December 24th to do our Christmas shopping or the day before our anniversary to rush out and get a gift. Even though we knew of the occasion well in advance, we procrastinate. While that may seem acceptable, traditional, even cute when it comes to shopping, don’t adopt that attitude when it comes to taxes.
Waiting till the last minute and rushing through your taxes is more than just stressful. It’s dumb. Because if you miss potential breaks and deductions due to haste, what you might waste is thousands of dollars. Start early, take your time, do a little research and see how less taxing your life can be.