Filing taxes is one of the most stressful financial transactions that most people do in a typical year. Small mistakes on this document could potentially cost a taxpayer thousands of dollars, making it imperative to complete it correctly and accurately. Follow these tips around tax time to make sure that you and your money are protected.
DO consider a Professional Tax Service or Software Program
The federal tax code is longer than the Encyclopedia Britannica, making it extremely difficult for one person to completely master. Professional tax preparers do nothing but study tax code, and many have teams of professionals that can work together to prepare more complicated returns.
At the very least, a tax preparing software program will reduce the tax code down into a series of easier to answer questions. These programs are usually developed by hundreds of professionals who are each an expert in their own area of tax law. Preparing a return with one of these programs is a lot easier than doing it on your own.
DON’T Forget to Include Your Children’s Social Security Numbers
Believe it or not, this is one of the most common errors that taxpayers make. Each child that you claim as a dependent must have a Social Security number in order to be considered eligible for credits and deductions. This is to reduce fraud by taxpayers claiming non-existent children as dependents in order to get more deductions.
DO Make a Copy of Your Return and all of the Accompanying Documentation
Obviously, tax returns get lost in the mail or lost at the IRS office, but the most important reason to keep copies isn’t to replace something that gets lost. A variety of government and civilian applications require a person to submit copies of their tax returns. Everything from student aid applications to mortgage applications require an applicant to submit copies of their tax return.
DON’T Wait Until the Last Minute to File Your Taxes
The IRS will start issuing refund checks as soon it starts to receive tax returns. As the returns start to pile up, however, there will be delays in refund checks. If you’re expecting a refund, get your tax return in early.
Even if you have to pay more taxes, waiting until the deadline can get you in trouble. Many people assume that just because they file later they are delaying their payment, but you can file early and send in a payment later. In fact, there are programs to pay off your tax bill past the deadline, but you have to apply early in order to be accepted into the best ones.
DO Look For Deductions and Credits
While this may seem obvious, nearly twenty percent of taxpayers just fill out the 1040EZ form. It is estimated that about half of these taxpayers would receive a higher refund by filling out the so-called “long form” or 1040 A. By using a tax professional or computer software program, it will be a lot easier to look for these deductions.
Be prepared by gathering paperwork for the most common deductions. Have receipts for any mortgage interest that has been paid, child care expenses, and charitable contributions. Also save receipts from activities such as purchasing a home, attending college, and making major purchases.
DON’T lie or fudge numbers. Nearly a quarter of Americans admit to cheating on their taxes at some point in their lives, but few people realize the consequences if they get caught. People who are caught cheating on their taxes will pay high penalty fees, interest, and in extreme cases they can even face jail time.
If you are unable to pay the taxes you owe, look at the programs the IRS has set up for distressed taxpayers. These programs allow people to make payments on their tax debt over several months or years instead of making a lump sum payment all at once.
Filing your taxes can be stressful, but there are many different options available to make this as easy as possible. As you get your return together for 2011, make a list of items that are difficult to find or figure out so that you will be better prepared for next year.
Kathleen Ison is a freelance writer and a mother of two teenagers. They have been wanting to buy a car for a while but they know very little about the taxes and additional costs associated with purchasing a car.