What to avoid when filing tax returns. Does the idea of filing your taxes make you want to hide in a closet? You're not alone. According to the IRS, last year 10 million people applied for an extra six months to file their tax return! Fortunately, there are ways to make the process a little easier and save you money, too. Illustration by Jenny Bowers
Do your Prep Work ASAP
The earlier you know the state of your backup documents, the better, so take time now to gather the paperwork (W-2s, bank and investment statements, receipts, etc.) that you'll need for filing your return. This will give you time to chase down anything that's missing. Once you get your papers in order, you'll be less likely to procrastinate and miss the deadline (April 17 this year), which could cost you 25% or more in penalties on taxes owed, says Mark Luscombe, principal analyst at tax research firm CCH. Learn what you should do now for next year's tax season.
Research Deductions
There are actually quite a few (totally legal) ways to shave your tax bill. Does someone else care for your kids while you work? You could get a credit for up to 35% of $3,000 of your expenses for one child or up to 35% of $6,000 for two or more kids, even if Grandma is the caregiver-as long as you paid her. Maybe you added insulation in your home to save on energy costs? Deduct 10% of the cost up to $500. To find out about more tax breaks, check out IRS Publication 17 at IRS.gov.
Skip the Paper Tax Forms
"I would encourage people to use a tax software program rather than getting papers from the IRS and doing it yourself," says Melissa Labant, a tax expert with the American Institute of CPAs. "Don't assume your return is straightforward."
Software such as TurboTax and H&R Block At Home automatically fills out the necessary forms after asking you a series of questions. Ranging from around $20 to $75, these products are cheaper than hiring an accountant. Also, your taxes can be filed electronically, so you could get your refund in as little as 10 days (there's an additional charge for state e-filing). Find out more about filing online.
Seek Free Help
Check with the universities, libraries and community centers in your area to see if any hold volunteer events where accounting students and tax preparers help fill out tax returns free of charge. If your income is $57,000 or less, the IRS offers free electronic filing through its Free File service (IRS.gov/FreeFile). Those with income of $50,000 or less can use the IRS's Volunteer Income Tax Assistance Program, which offers free tax filing by volunteers at community centers, libraries and shopping malls across the country (call 800-906-9887 to find the center nearest you). And for those 60 or older, AARP offers Tax-Aide through the IRS's Tax Counseling for the Elderly Program; call 888-227-7669.
No comments:
Post a Comment