Check here to learn how to deduct mortgage interest on your taxes.

Make Mortgage Payment Early to Deduct More

One of the biggest tax deductions that is available to ordinary taxpayers is the mortgage interest deduction. Simply put, the 2011 mortgage interest deduction is the ability to deduct whatever amount you pay in mortgage interest from your income taxes. There are several rules and exclusions, but they don’t apply to most taxpayers unless you have more than $1 million in mortgages or several houses. This is one of those tax deductions with no income limits.  You do need to itemize your deductions in order to claim the mortgage interest deduction. For many people, the amount of their mortgage interest deduction determines whether it is best to itemize or claim the 2011 standard deduction amount.

In a normal year, you make 12 mortgage payments. Add up the total amount of interest paid, and that is how much you get to deduct. Your mortgage company will actually do it for you because they are required to submit a 1099-INT to both you and the IRS. This means the IRS knows how much money you actually paid on your mortgage, so this isn’t a good place to get creative. You can find the 2011 1099-INT forms on the IRS website. (Update: The 2011 1099-INT forms are now also available.)

However, as with most tax deductions, you get to claim the amount amount you pay during the year regardless of when it is actually due. Thus, if you pay your January mortgage payment in December, you get to deduct it on this year’s taxes. That means you get to deduct the amount of interest paid on 13 payments instead of just 12.

For example, let’s assume for the ease of math that you pay $1,000 per month in interest on your mortgage. (Keep in mind that only the interest part of your payment is deductible. The amount that goes to principal and the escrow payment is NOT deductible.) If you made all the payments at the regular time during 2011, then your 2011 mortgage interest deduction would be $12,000.

That’s not too shabby. But, if you pay your January 2012 payment during December 2011, then you have made 13 payments during the 2011 tax year instead of 12. That means that on your 2011 taxes you can deduct $13,000 instead of just $12,000. That extra $1,000 deduction can be very valuable especially at higher tax brackets. In the 30 percent tax bracket, making your payment just a few days early saves $300 on your taxes.

The Catch to Paying Your Mortgage Early

There is, of course, a catch to using the tax trick of paying off your mortgage early.

By making your January 2012 payment in 2011, you have eliminated one of the payments you would normally make during 2012. That means that you can only deduct 11 mortgage payments worth of interest in 2012 because the January payment was not made during 2012, it was paid in 2011.

In our example above, by paying the January 2012 payment early, you got to deduct $13,000 in 2011. But, that means you will only be able to deduct $11,000 on your 2012 taxes. There is a way around this. If you make your January 2013 payment during December 2012, then you can deduct the full-year of interest of $12,000. However, there is no way to get that extra deduction again until you bite the bullet and take only 11 months worth of interest payments as your mortgage deduction in some year.

Mortgage Interest Deduction Audits

Here is the mistake that many taxpayers accidentally make.

In 2011, they read about this really great idea to make their January mortgage payment early in order to get a bigger interest deduction. So, they pay 13 months worth of payments during 2011 and they deduct 13 months worth of interest. So far, so good.

However, in 2012, they forget that they did that. The mortgage company sends them a 1099-INT that shows a full 12 months of interest payments for 2012 and they deduct the full 12 months of interest, even though they can only legally deduct 11. Then, are those who try and use the trick again in 2012 by paying their mortgage early and deducting 13 months of interest when they only qualify for 12 months of interest payments.

Remember those 1099-INT forms that the mortgage company sends to both you and the IRS?

That is how you get caught. The IRS computers run the numbers on the forms against the numbers you claim and sometime in 2013 or 2014, a letter shows up in the mail saying that a routine examination of your return has discovered a possible error. If you are really unlucky, your return will get flagged for a full-scale audit. Typically, however, you’ll just be subject to an “information audit” where the IRS will require you to provide documents to support your deductions.

It won’t take long for cancelled checks and mortgage statements to reveal that you claimed too many deductions in 2012 and owe back taxes and interest on the amount. Theoretically, if the IRS can prove you did it on purpose, you can also be on the hook for fraud and additional penalties, but this kind of mistake happens all the time and non-accountants routinely fall victim so they probably won’t go after you for that.

How To Maximize Tax Deductions by Paying Mortgage Early

Paying your mortgage early to increase your mortgage deduction amount in 2011 works best for people who either have income that varies from year to year, or people who know that they are going to get hit with a big tax bill and will adjust for it on their 2012 taxes.

If your income varies because you earn commissions, own your own business, or you get bonuses that are different sizes each year, then you want to pay your mortgage early in a year where your income will be high. Even if it is high the next year, you can pay early again and keep your full-year interest deduction. Eventually, when you have an off year or your bonus is smaller than usual, you can not pay early and only deduct 11 months of payments. This “reloads” this tax deduction increase trick for another year when your income is higher.

For people who get an unexpected windfall during the year that may result in a higher tax bill, that extra $300 deduction will give you some extra room when filing in 2012 for your 2011 taxes. Just be sure to adjust your withholding for 2012 so that you don’t come up short again.

Paying your mortgage early is a good end of year tax tip. However, be sure you fully understand what you are doing and how it affects your future taxes. If you pay early this year, you have to pay early for every other year until you are ready to take the smaller 11-month size deduction.

Subscribe to the Finance Gourmet Feed to get all of our coming 2011 end of year tax tips.

Related posts:

1. 2012 Standard Deduction Amount Set
2. 2009 End of Year Tax Strategies – Calculate Dollar Amount of Tax Moves

Mortgage Tax Deduction End of Year originally published at Finance Gourmet

Many people have the misconception that the TurboTax file saved on their computer as they worked on their Income Taxes is a regular file that can be opened and printed with a regular software program like Microsoft Word or Adobe Acrobat Reader. Unfortunately, that is not the case. The files generated by popular tax preparation programs like TurboTax and TaxCut is a proprietary file that can only be opened in the tax program. While next year’s version of the program will most likely be able to open that tax file, you have to buy it first. That isn’t very helpful if you need to produce a copy of your taxes in September to get a small business loan or open up a bank account.

There are ways to hack open TurboTax files, but why go through all that trouble?

Print Your TurboTax Files Now

While your tax program is still installed on your computer hard drive, run the program and click on the File Print Save section. I recommend printing out a hard copy of the actual forms submitted to the IRS as part of your income tax filing. That includes the Form 1040, Schedule A, Schedule D, and so on.

Most programs allow you to select how much you want to print, ranging from print only the official IRS form filed or e-filed, all the way to print everything, including all worksheets. Just print the filed forms. You won’t need all that other stuff unless you get audited.

However, you might want some of those numbers later on, and re-calculating them is a waste of time. Instead, use the program’s save function to save out one of the "all worksheets, all forms" options as a PDF file. That way, you can open and read that file whenever you want, even if the tax software has been uninstalled from your computer.

Which brings up one final point. By default, TurboTax saves your personal tax information files in the TurboTax directory. Normally, that isn’t an issue, but if the day comes when you are looking to delete some files from your computer, or choosing which files to backup or move to a new computer, you might think that the TurboTax folder is just the program’s files. In that case, you might assume you don’t need them anymore!

Go ahead and copy both your program’s data file, the TurboTax file, AND the PDF file that you saved out as instructed above to another folder. Name this folder something like Taxes 2009, and you can be sure that when you see that folder five or six months for now that you will probably be thinking, "Oh, those are my taxes. I better make sure and save those."

Get ready to start saving money on taxes in 2010! But, first, go out and relax a bit. You’ve earned it.

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Printing Tax Returns TurboTax or TaxCut originally published at Finance Gourmet

Many of the deals websites out there (check out Slickdeals.net and Gottadeal.com as well as Dealnews.com for starters) will notify you when companies like Intuit offer free online TurboTax applications for users who show up within a certain time frame. The HR Block guys similarly offer free TaxCut software signups from time to time.

If you are wondering what the catch is, because obviously these companies can’t make money by giving their programs away online, then good for you. The first step to avoid being a sucker who gets scammed is to be aware of what makes sense, what motivates people and companies, and trying to see the find print.

In this case, the fine print comes in the form of add-on offers. Depending on which deal on tax software you get, it might be free to input all the data and print the return, but there is a charge to e-file. Another strategy is to offer free Federal Income Tax preparation and free e-file, but to charge for doing your state income tax return. Unless you live in New York, California, or another state with complicated state income taxes, chances are your state return is pretty easy to do by yourself. Of course, there is always the “subscription” trap, where you think you are getting something for free, but are actually signing up for a $99.95 annual subscription to something. Just make sure you don’t enter a credit card number and you should be OK.

These sites also require registration and while these are legitimate companies that don’t benefit from spam or overly aggressive marketing, you can be sure they’ll be in touch sooner or later.

In Colorado, for example, the State of Colorado offers every resident free online e-filing of their state income taxes. For 90% of residents, all that you need to do is plug in a handful of numbers from your completed IRS Form 1040 tax return (they even tell you which line numbers to use) and then hit submit. (There is more to it for certain circumstances like partial-year residents, land income, and so on.) In other words, you would be a fool to buy TurboTax State edition if you live in Colorado.

If you don’t want to watch the deal websites (which is really the easiest way) you can also pop onto the main product webpages at turbotax.com and taxcut.com and see if they are running a public deal. However, you might have to dig around a little bit. After all, these companies don’t want to offer free software to someone who is coming there to buy it!

More personal finance tips and advice

Finance Investing Banking Information and Eduction

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Free TurboTax Software Online – Deals on Tax Programs originally published at Finance Gourmet

On the other hand, when people choose to open their hearts and give money to help those in need, the U.S. Government thanks them in the form of the charitable tax deduction. Typically, donations to charity must be made by the end of the tax year, December 31st, in order to be deductible in that year. However, with the tragic earthquake that struck Haiti, Congress passed a law and the IRS implemented an exception to the rules for certain cash contributions for Haiti Relief.

In order to qualify, the donations must be considered “cash” donations (checks and wire transfers, and so on do count as cash). They must also be made to a qualified organization, typically a non-profit 503(c) organization in most cases. The donations must also satisfy all other normal requirements for deducting cash gifts to charities.

The deadline for making a cash donation for Haiti relief and being able to deduct it on your 2009 Federal Income Taxes is March 1, 2010 (today).

If you already made a donation, you can deduct it from your income taxes as well.

Unfortunately, one of the requirements for taking a tax deduction for a cash contribution to a charity is retaining proof of the contribution, most often, in the form of a receipt. However, in the aftermath of the Haiti tragedy, numerous new methods of making quick and easy donations to relief organization were created, including the ability to donate via text message.

A live television show broadcast nationwide ran numerous donation options across the bottom of the screen during the Haiti Relief telethon, including the option to donate $10 via text message. The $10 donation was then added to the phone bill of those who sent such a text.

Fortunately, the IRS has clarified that a phone bill from your cell phone company or other telecom provider will satisfy the record of proof requirement. This 2009 tax trick is particularly helpful for those of us who made donations upon seeing the devistation without pausing to think about the tax implications.

Be sure to hold on to your phone bill, however, for your records. If you follow smart financial advice about paying your bills automatically and opt-in for electronic statement delivery as one way to help prevent identity theft, then you need to log on to your account and print out the electronic statement to ensure that you have a printed record of your donation.

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Haiti Cash Donations Still Deductible Until March 1, 2010 (Today) originally published at Finance Gourmet

Unfortunately, many tax deductions are either too small to have very much impact on how much taxes you pay, or are too narrowly tailored to actually be a tax deduction that most people can take. Add into the mix the fact that many of the things that people “just know” are tax deductible, actually are not tax deductions until they are higher than a certain “floor”, and most searches for new tax deductible items end in dissapointment.

The good news is that some big items are deductible for almost everyone. These are the best tax deductions out there and they are good for high-income taxpayers and lower-income taxpayers alike. These include deducting mortgage interest, many educational expenses, and tax deductions for children, and the related child tax credit. One of the other biggies that can bring tax burden relief is deductible property taxes.

Deducting Property Taxes on Income Tax Forms

Many people are surprised to find out how much property taxes they pay on real estate, particularly on their primary residence. This is because a large percentage of home owners pay their property taxes via their mortgage loan.

That is, that the mortgage company collects an extra amount of money with each payment which it keeps in an escrow account. Over the year, that extra money adds up to enough cash to cover the amount of property taxes due. If it the escrow account comes up short, the mortgage company fronts the money and then increases the part of the monthly loan payment for escrow.

Even though the mortgage company handles paying the property taxes for you, it does so with your money, which means you are the still the one who paid the property taxes, and therefore, you are the one who gets the property tax deduction. Check the 1099-INT tax form the mortgage company is required to send you each year. Both the amount of mortgage interest paid for the year and the amount of property taxes paid annually should be listed.

Don’t forget about other property taxes too! The most common type of property taxes that are deductible, other than real estate property taxes, are the property taxes on cars. Automobile property taxes are deductible if they are computed based upon a percentage of the car’s value. In other words, the taxes that are levied by the state, county, or city that are a variable amount depending on how much the car is worth are deductible. Flat taxes and fees, such as a $25 annual fee,  that are the same amount no matter what the car is worth are not deductible.

Keep an eye on the mail for all tax forms, including 1099 Forms for real estate and brokerage and banking accounts. There are important tax numbers on each of these.

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How To Deduct Property Taxes originally published at Finance Gourmet

One of the most effective ways for typical households to lower their tax bill is by donating items to charities. Unlike cash donations, donating used goods to charity is a free way to reduce the income taxes you pay. A quick trip to the basement or storage closet could turn up several trash bags worth of used clothing that no longer fits your children, or you. Other items like shirts, pants, suits, jackets, shoes and more may just be out of style, or no longer fit your current dressing manner.

For example, workers who used to have to wear a suit and tie to the office may now work in a business casual environment. Unless you live on the East Coast, suit and tie occasions don’t come up all that often. Hold onto one dark suite for funerals and formal weddings, and one less formal suit for other semi-formal events. Even clinging onto one fun suit, or stylish suit that you "might" wear to "something" someday can still leave you with a dozen suits that can be donated to local charities. Keep track of everything you donate with "contemporaneous records." Take the receipt from the charity and fill it out right away, but also keep a log in a notebook or a note card of everything you donate.

If you haven’t cleaned out your basement or storage unit in the last few years, there might be TONS of used clothing in there that you can donate. Don’t be afraid to donate it all and claim every last penny on your income taxes. Again, just keep very good records of exactly what you donated and when. Back up the charity’s receipt with your own logs, and, for extra measure, take some digital photos of the clothing. There is no need to capture itemized pictures, a few pics of a giant clothing pile and maybe one or two of the twenty bags being dropped off at Goodwill should be more than enough proof to head off any challenge regarding how much you donated. (How much you valued each item at, is a different story, which will cover next year when we talk about how to prepare your 2009 Federal Income Taxes.)

Don’t stop at clothing. Small appliances (think anything that could be used in a dorm room or small apartment), electronics, sporting goods, and more can all be donated to charities that would gladly accept them.

As an added tip, break up your donations by dropping them off over several days, or donating a portion of your used goods to various different charities. The IRS requires additional documentation for single donations that exceed $400. Keep each donation under that amount, and relive the extra burden of documenting larger charitable donations.

With many charities having one of their worst year ever raising money for good causes, now is the time to pitch in and help out. By donating unwanted items that are laying around your house, you not only help good causes that you believe in, you can also make some money and save on your taxes next year at the same time. Plus, you house will be cleaner, and you might actually be able to find some of those important things that are lost in your storage areas.

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End Of Year Tax Tips – Save Money On Taxes By Donating Clothing and More originally published at Finance Gourmet

To avoid making tax moves that aren’t worth the trouble, there is a simple strategy.

Always calculate the real dollar amount of any tax strategy prior to implementation.

Tax Savings Strategy Example #1:

The Top 10 End of Year Tax Strategy Tips lists always include the barely usable advice to pay your January mortgage early. By paying your January mortgage bill in December, you get to deduct the interest from your payment in 2009.

There is a big, fat catch, however. Although you do get to deduct 13 months worth of mortgage interest in 2009, you will only get to deduct 11 months worth of interest in 2010 unless you make sure to make that January payment in December again next year. This will be true until you finally bite the bullet and take just 11 months worth of deductions, or you pay off your mortgage. Is it worth it? Maybe.

Calculate the real dollar amount of tax savings from paying your Jan. 2010 mortgage in December, 2009.

Grab a mortgage statement and find out how much of your monthly mortgage payment goes to interest. What you find might surprise you. If you pay your homeowners insurance and property taxes through your mortgage company (a common practice) a substantial chunk of your monthly payment goes toward those, and you do not get to deduct those items by paying them early. Likewise, if you have had the same mortgage for many years, or you have a 15-year mortgage, a big hunk of that monthly bill might actually be going toward principal. (The horror!

A $2,000 monthly mortgage payment might breakdown as $500 per month into escrow (for the taxes and insurance) and $500 per month going toward principal, leaving just $1,000 per month paying interest.

For a taxpayer in the 25% tax bracket, paying that extra mortgage payment a year earlier will result in a tax savings of $250 in real dollar numbers. Conversely, that will be the approximate cost of forgetting to do the same thing next year. Even worse, is if the taxpayer forgets to do the same thing next year, AND forgets to properly account for the fact on their 2010 taxes.

Tax Savings Blunder Example:

Assume our taxpayer pays 13 mortgage payments in 2009 thanks to the advice in a year-end tax savings tips article. He saves $250 on his 2009 taxes.

Let’s that come 2010, our taxpayer is very busy at year end racking up sales and commissions to increase his income. He doesn’t have time to read any of those tax advice year-end articles and isn’t really thinking about Federal income taxes as he flies around the country trying to make sales.

Come April 13th, he fires up TurboTax or some other tax preparation software and types in all the numbers. In the tax deductions section he inputs his mortgage information. If he used TurboTax to file taxes in 2009 or imported his 2009 tax returns, he might get a flag about entering his mortgage info, and maybe not. Even if he does, there is no guarantee that he will pay any attention to it as he rushes to complete his taxes. After all, entering in the mortgage information from the 1099-DIV the mortgage company sends is a no brainer, right?

Unfortunately, he includes all 12 months worth of interest on his 2010 income taxes. Since he did not pay the January 2011 mortgage payment in December 2010, he actually can only deduct the remaining 11 interest payments in 2010.

In 2011 or 2012, or taxpaying hero gets a phone call from the IRS. It’s informational audit time and the IRS would like to see additional documentation regarding his 2009, and 2010, mortgage deductions. The taxpayer does the smart thing and runs to a tax attorney, accountant, or enrolled agent, and finds out to his dismay that he owes back taxes and a penalty. Chances are, he’ll get out of any fraud trouble, but it still won’t be cheap to pay up, especially if it takes two or three years to get around to the audit and that interest payment has added up.

Tax Advice Worth It?

Is it worth a $250 savings to follow this tax advice? You bet it is! Why pay extra when you don’t have to. But, if the above example sounds a lot like you, you might want to think twice, or make a really big note in your 2010 Taxes file.

But, what if the taxpayer is in the 10% tax bracket? Don’t laugh, it’s possible for high-income taxpayers to save enough money through deductions to get down to a tax bracket of 10%.

Then, the above example is worth just $100. Many other tips and advice will produce raw dollar amounts of tax savings of even less, sometimes just $10 or $20 for a complicated strategy that involves collecting a lot of receipts and getting a bunch of tax forms just right.

In the end, you are the judge of what anything is worth to you. The important thing is that you know what its real value to you is before you waste time and money on something that has limited value.

Tax Deductions Value

One final, very important thing to consider when determining the cash value of any tax savings advice is its possible impact on other tax deductions. To determine whether or not this need concern you, pay attention to any tax credits or tax deductions that are phased out or that have income limits. Depending upon the tax deduction or credit and where the tax savings created by the strategy used occur (above the line or below the line) the value of a tax-savings tip may actually be much higher than just the amount directly created by the tax avoidance strategy.

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2009 End of Year Tax Strategies – Calculate Dollar Amount of Tax Moves originally published at Finance Gourmet

You wanted something more amazing didn’t you.  So do most people, which is why they buy books and magazines and secret kits and then pay the same amount of taxes as they did last year.

This year try something different.  Just save more receipts.  When it comes time to file your taxes you won’t use any more lines on the tax forms for deductions, but you will be able to have higher numbers on the lines that you already use.

A Smaller Tax Bill

Wait ‘til next year.  The most often used phrase in sports may also be used by many taxpayers this week as the stress and shock of filing federal income taxes wears off.  Whether it was having to write the IRS a big check, or if it was seeing how your tax bill compared to others, or if it was just seeing the enormous number that you earned but never got to see thanks to paycheck withholding, it’s common to want to pay less taxes next year.

Paying less taxes is a goal that most Americans have.  Yet, it is a goal that most of us fail at.  The problem is two-fold.  First, life happens.  We get busy, we have other concerns, and pretty soon, the amount of money being sucked out of our paychecks each week or each month fades into the background noise until early next year, when once again, we are forced to remember how much money we lose each pay period to taxes.

The second problem is that even when we do manage to take action, it is often the wrong action.  Huge books line the shelves at libraries and bookstores offering children’s fantasies to pay zero taxes, or to cut your tax bill in half.  Others, simply promise to give you all the knowledge of a CPA or an MBA in 21 days, or whatever.  The truth is that the answer to lower taxes does not lie inside the thick books, nor in some unknown trick carefully hidden in the dark shadows of finance and tax law.

The Tax Secrets Myth

Every year, literally millions of people examine the tax code, tax laws, and all of the tax changes to find ways to save money for themselves or their clients on taxes.  Their findings are not kept a secret.  Instead, they are propagated through advertising, publishing, and numerous other methods.  However, it is in some people’s interest to continue spreading the myth that their are tax secrets, that you are a sucker who pays too much because you don’t know them, and if you would just buy their book, their kit, their package, their subscription, their service, their whatever, you too could pay zero taxes!  As you can imagine, every one of these people has something to sell you.

Here is the little known truth about income taxes.  Payroll taxes are virtually impossible to lower in any meaningful way.

Shocked? Don’t believe me?

Grab any tax tricks book, website, or article you want.  Start reading.  You will see all kinds of ways to do things about lowering your taxes, but look closer.  You have to have something else first.

1035 Exchange?  It’s great, but it only works on real estate.

A deduction you’ve never heard of before?  Do you have to have a small business first? Or, does it have to be a certain percentage of your income before it counts?

Trusts?  Works on assets, but not paychecks.

Off-shore accounts? Ditto.

What does work?  The usual.  Home mortgage interest, property taxes, state & local taxes, child care, child tax credit, student loan interest, tuition, capital losses/gains, dividends, IRA contributions, and charitable gifts.

Medical bills work, but only if they are at least 7.5% of your income, and then there are a bunch of miscellaneous deductions.  These are the ones that people love to tell about that are “secrets”. 

The truth is even if you tried to get every one, they probably would still have no impact on how much taxes you pay because they don’t count until they exceed 2% of your income.  Did you subscribe to enough magazines, buy enough tax software,  and drive to enough seminars to add up to 2% of your income?

Most people don’t.  That is why they don’t know about those deductions.  They don’t apply to them.

Which Deductions Can Normal People Get

When it comes to taxes, there is a standard list of tax deductions that are likely to apply to most people.  Everything else is a specialized gimmie to a special interest group, or a political ploy to appeal to certain voters.  In others words, it isn’t for you, and getting one of those deductions is likely to cost you more than you would save.  Your best bet tax-wise is to not worry about these “secret” deductions. 

If you are afraid that you won’t get one of the special tax deductions when you qualify, don’t worry.  Someone will tell you.  Someone will be so eager to tell you that you’ll know about it before you have even thought about any tax implications.  Why?  Because every finance or transaction professional in the world wants to have your business and they all have been repeatedly told that saving you money on taxes makes their service more valuable.  So, when you go to sell a piece of real estate that might qualify for a 1035 Exchange (your home does not), trust me when I tell you that the real estate agent, the loan officer, and probably even the people at your bank will bring it up.

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Related posts:

1. End Of Year Tax Tips – Save Money On Taxes By Donating Clothing and More
2. How To Deduct Property Taxes

How To Pay Less Taxes Next Year originally published at Finance Gourmet

How To File Taxes Quickest

Mail them, e-File, whatever.  Filing is not the part you have to worry about.  Getting the forms completed right is what takes time.  So, forget all about filing, focus on the Forms.

1. Get The Electronic Forms – If you aren’t using software, then get the fill-in PDF files from the IRS.  You can type your answers right into the Form 1040 fields and save on typing, hand-writing, scanning, and printing.  Best of all, when you are done, just save the file to your hard drive.  (Make a backup CD and store it with your hard-copies of 2008 tax documents.) 
2. Big Income First – The 1040 starts with Income, so jump in.  Start by just sticking in the big things, salaries (W2 Forms), business payments (1099 Forms), and so on.  Interest, dividends, and the like take a long time and can throw off your momentum so feel free to set them aside and move on instead of bogging down on entering all 18 of your 1099-INTs.  Just make sure to keep the items not input in a separate folder.  Sorting through what you have and have not already done is the slowest of all.
3. Big Deductions – Sure you want to deduct that $5 you gave the kid up the street for his school fundraiser, but if you are in a hurry throw it in the pile with all your 1099-INTs.  Input your mortgage interest, student loan interest, child tax credits, property taxes, and so on.
4. Use Tax Software – Buy it, or don’t.  Use the “free” online versions to jam your numbers in.  You only have to pay when you file or print.  Don’t file or print.  Get the math done for you and then fill in your PDF fillable forms.   By the way, if you do want to print, Press ALT+Print Screen.  That takes a screenshot or capture of the active Window (if you get the wrong window, just click on the title bar of the one you want and click ALT+Print Screen again.)  Paste that picture of the screen into Word or your favorite graphics program and voila, print out.  (You cannot file screenshots.)

The point is to get an idea of how bad it’s going to be.  If this first pass with just the big stuff shows you getting a huge refund then you can worry a little bit less about having to read through every possible tip and trick you can find to try and save yourself from a huge tax bill.  If, on the other hand, you are coming up with a monster tax payment you have to make, then you know that you have to focus and start looking for every piece of paper you can find.  When you time = real dollars, you’ll find the time – trust me.

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2008 Last Minute Tax Filing Tips originally published at Finance Gourmet

The IRS offers taxpayers a way to file their taxes online for free without having to buy any tax software like TurboTax or TaxCut.  Just go to the IRS website (www.irs.gov) and click on e-file to get started.

The free government e-file system allows taxpayers with incomes up to $54,000 to file tax returns for free online.  If you make more than $54,000, you are out of luck and will have to go another route to file your taxes.

When you are done, you can pay electronically online too.

Pay Your Taxes With Credit Card

Thinking about paying your taxes online electronically with a credit card to earn a free rewards trip?

That might not be the best move.  Sure you can earn points or miles on your credit card rewards programs, but it won’t be cheap.

The two major online payment processors, Official Payments (which is not official in anyway, it’s just their sneaky brand name), and 1040.com charge electronic filers 2.49% to make federal income tax payments via credit card.  That means a $500 payment could cost you an extra $12.45 just to use your credit card.  That’s worse than the highest ATM fees you’ll find in a bar.

That credit card fee also means that the value of any points or miles you might be getting are wiped out too, since most credit card reward programs earn points that are redeemed at about 1%.  Most cash back cards pay 1% as well, so paying a 2.49% fee to earn 1% doesn’t make much sense.

The exception to this rule is if you are in some sort of special intro period with your credit card rewards program or cash back program.

For example, if you have a new cash back credit card that pays 3% cash back on everything for the first 90 days, then you can actually come out ahead 0.51%.  Not big savings, but you do get the convenience of paying electronically for free.  However, if your cash back program has an annual limit and you expect to be hitting it, don’t waste your cash back eligibility on just getting a measly 1/2 percent.

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E-File 2008 Return Free – Tax Tips originally published at Finance Gourmet