4 Tax Preparation Secrets Revealed
One in an occasional series of articles about your taxes.
Tax season spans roughly from the first day of the new year until tax returns are due, which is usually on April 15. Ask most taxpayers if they’re thinking about their tax returns in January, and most will likely say that they are handling the Christmas season aftermath, paying outstanding bills and adjusting to the new year. Come February, that begins to change with 1099 forms in hand and the realization that there is much work to be done to get returns finished and filed.
Let’s take a look at some tax preparation secrets that can help you get your taxes done on time and might yield a big, fat refund this year.
1. DIY or professional assistance — If you can handle doing your taxes yourself, then do so with some help. That help should come from downloadable software such as TurboTax or TaxAct. For everyone else, enlisting the services of a tax preparation professional can be a wise if not profitable move. A tax prep pro can help you find deductions you might miss, netting you a much larger return that will pay for the cost of your return and then some. Secret revealed — make your tax prep appointment early, well before the tax rush begins. A rushed tax prep professional might overlook one or more significant deductions.
2. Pull it all together — Every receipt, form and document related to your taxes should be in hand before you start your return. Miss out on something and you may have to amend your return later on, costing you time and money. Secret revealed — those 1099 forms you think aren’t all that important are reported to the IRS. Leave information out and you could be hit with fees and an IRS audit.
3. Know your deductions — All taxpayers are entitled to take whatever deductions they have coming their way. You’re not obligated to pay more than you should — include the interest you paid on your mortgage, property taxes, contributions to your retirement account, deductions for a home office used for self-employment and more. Secret revealed — if you received unemployment compensation last year, then that amount needs to be claimed. However, if the benefits were received from a company financed fund then these benefits are subject to income tax withholding as wages — (see Topic 418 — Unemployment Compensation).
4. Consider your kids — You know that there are deductions for your children, right? Those deductions extend to every qualifying child in your household. Secret revealed — a child living under your roof who is not related to you may be deductible if you provided assistance for at least six months of the year. You’ll need to satisfy four IRS tests, but if you do, then you can take as much as $1,000 per qualifying child tax credit — (see — Ten Facts About the Child Tax Credit).
It is no secret that adequate preparation and awareness can save you time and money. Don’t let the government hold a dollar more of your hard-earned cash then necessary.