Thursday 17 October 2013

Become a Tax Expert with These Helpful Tips

As the end of the year approaches and the thought of taxes looms, some people decide to avoid the rush and start panicking early. Rather than be stressed about tax season this year, why not take steps to meet the challenge head on. Preparing your taxes doesn’t have to be a hassle if you plan ahead and follow a few simple tips:

Get organized

Make sure you receive all income forms by the second week in February. Bank statements should be in your hands well before the end of March. If you make contributions to an IRA, those forms might not show up until after April 15th, so call your financial institution if necessary to get the information.

Check each document for errors as it comes in. If you find any, contact the business or bank that issued the document and get it corrected.

Collect any receipts you’ve saved including donation receipts. If you’ve made improvements to your home that include energy efficiency upgrades, make sure you have these documents as well.

If you live in a state that collects income tax, make sure you have any separate paperwork that may apply to filling out those forms.

Line up your deductions

Don’t overpay your taxes because you didn’t take the time to check your deductions. Most people are aware of using mortgage interest as a deduction but overlook less common ones such as tax preparation deductions. 

You may be able to take extra deductions for some big-ticket items such as cars. List any large purchases that you made this year and have them ready so they aren’t forgotten in the rush of paperwork.

Education, business travel or other business related expenses may be deductable. State sales tax is generally deductable, as is state income tax. If you are unsure about taking a deduction, talk to a tax preparer or browse the IRS web site.

Contribute to your IRA

Everything that is contributed to your standard IRA is not taxable and you have until April 15th to contribute for the previous year. Take advantage of the tax savings and get prepared for your retirement at the same time; contribute as much as you can.

Although contributions to a Roth IRA are fully taxed, it’s still a good idea to take this time to max out those contributions as well.

Decide how you are going to file

There are numerous tax programs out there as well as some free IRS tax help. If your return is simple you may be able to file for free, but more complex tax situations will need a tax program or professional assistance.

Most returns are filed electronically, whichever preparation method you use. You will get the fastest return of your refund by providing a routing number on your form that allows the government to deposit the refund directly in to your account. E-filing also gives you the opportunity to track the status of your refund through the IRS website

Don’t rush

Give yourself plenty of time to get this done. Mistakes happen when you hurry, and waiting until the last minute to get started just raises your stress levels unnecessarily. Allow enough time to review the forms a couple times before you need to submit them.
Don’t forget to save a copy of all of your forms. If your preparation was done electronically you can save your work in a folder, or print a hard copy for your file drawer.

Do you have have any questions or suggestions? Feel free to write in comment section.

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