Let’s face it. Tax season can be a huge bummer for most people, and it seems the more you try and avoid it the more it comes back to haunt you.
Although preparing tax returns can be a daunting task, there are ways to get organized beforehand in order to avoid a disaster. The Tax Fairy is not going to excuse you from filing this year but these 10 helpful tips might help alleviate any problems due to procrastination or misunderstanding.
1. Get serious. Taxes are no laughing matter and the smallest mistake can have you pulling your hair out. Gather your materials that you will need before you begin. Make a list of the necessary paperwork, etc., to prepare yourself. In other words, get your attitude right!
2. Get started. Take action to start preparing your taxes immediately. The longer you postpone doing them, the worse it will be, and you’re only running from the inevitable. It always catches up to you in the long run, especially when the letters “IRS” (Internal Revenue Service) are involved. So get to it!
3. Get organized. Something has to go on those returns rather than made-up numbers. Get your W-2s together to report wages, be prepared to report interest and dividends, get your 1099Bs and 1098s and 1099s together, too – for reporting stock and bond sales, for deducting your interest and taxes, for backing up any and every entry. The IRS and your accountant, if you use one, both want final and accurate numbers. It makes it easier for them and less painful financially for you. If you bring a shopping bag full of receipts to the table, or to H&R Block, you're going to feel the pain, perhaps most especially in your wallet.
4. Get help. You might remove a splinter from your own finger, but you wouldn’t perform surgery on yourself. Don’t do your taxes if they are too complicated for your skill level. If you take the chance of doing your own taxes when you really have no clue as to what you’re doing, you can get yourself into a world of hurt. Be careful and don’t be afraid to get the help you need. That’s what the professionals are there for. The flipside of getting help is that it is also tax deductible! How can you go wrong?
5. Get the right status. Decide how you're going to file. The lowest rates are with joint returns, but with lots of medical or miscellaneous deductions the “married filing separate” status may yield a lower total tax. Try it both ways. Alternatively, a single mother may qualify for the head-of-household rates, which are better than the rates for filing as a single. Sometimes, when a joint return isn't practical, even a married person with a dependent child can qualify for head-of-household rates, which are much better than married filing separate. You need to know the rules.
6. Get adjusted. There are certain deductions that are allowed regardless of whether you itemize or not. Such deductions include IRA and qualified pension contributions, moving expenses, alimony student loan interest, medical savings account deductions and, for the self-employed, health insurance deductions and credit for half the self-employment taxes paid.
7. Get itemized. Make a list of your standard deductions and compare the total to your total allowable itemized deductions. The latter is the sum of your allowed taxes, interest, charitable contributions, medical expenses, casualty and theft losses, and miscellaneous itemized expenses.
8. Get exemptions. For 2008, you get to take off as much as is allowed from your income for each qualified exemption you have. Despite anecdotes and even tall tales to the contrary, this can include several unanticipated things, and you may be surprised as to what those exemptions actually are. Look into it.
9. Get cash. Decide how you're going to file, as that's going to affect how quickly you'll get your refund. If you choose to file electronically, then you are looking at a quicker refund as opposed to paper filing and the mails going both directions, which can take from several weeks to several months. Certain businesses, like H&R Block, also do what are called “rapid refunds” that can get you your money in about a day in most cases. Of course, there are certain requirements (and fees) for such services.
10. Get filed. None of the foregoing even matters if you don't actually get your return to the IRS. If you owe money, there's interest and penalties for not filing, as for filing late, in addition to interest and penalties for not paying up. You've done the hard work, so now make sure to get it off your desk – or file for an extension. Even if you do file for an extension, you have to do that in time, too.
It’s all about time when you’re filing taxes. Spend the time, and do it all on time, too!
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