Ok, boys and girls, its April 8th. Just one week to go before April 15th, the dreaded Ides of April when the [tag]IRS[/tag] wants your completed taxes in the mail. So, here are the [tag]Top 10 Last Minute Tax Tips[/tag] to save you money on your taxes and make them easier and faster to do.
- Sort Your Documents
- Use envelopes, file folders, piles, or whatever you feel comfortable with to sort out your documents. This will keep you from having to flip through a huge pile for every entry and will make it less likely you will have to go back and add in one more 1099-G that your forgot about. Sort your documents into: W-2s, 1099s, Mortgage Documents, Student Loan Documents, Charity Receipts, Medical Receipts, Child Care Receipts, Other Receipts.
- Estimate Your Medical Expenses
- Your medical expenses will be deductible only if they exceed 7.5% of your taxable income. Do some quick math before you bother entering in all of those co-pay receipts. If your income is $100,000 and no one in your family had a major medical issue and you have good insurance, chances are there is no way you spent $7,500 during 2007. So, stuff all of those receipts in an envelope and skip this whole section when it comes up.
- Estimate Your Miscellaneous Deductions
- Tons of people save receipts all year long for items that are tax deductible, and that is a good thing. However, this can make the pile of receipts look overwhelming and cause a lot of work sorting and entering those receipts. Things like moving expenses, unreimbursed work expenses, professional dues and subscriptions, and even the oft mentioned tax preparation expenses are only deductible to the extent they exceed 2.5% of your income. Again, some quick math is in order. If you have $100,000 income these expenses must exceed $2,500 to be deductible. If you are looked over 20 receipts mostly for $40 expenses, you aren’t going to get there. Stuff these into a second envelop and move on.
- Deduct ALL Your State Taxes
- Chances are you already know to deduct the state or local taxes you paid that were withheld from your paycheck, but don’t forget about others. For most people that includes taxes you paid to register your car or boat. If the tax is based on a percentage and not a flat fee, chances are it is deductible, so grab your registrations and see.
- Sales Tax vs. Income Tax – Don’t Waste Your Time
- Check a couple of sources to find out which one is likely to be the bigger deduction for you. Unless you made a large purchase in 2007, you can be pretty sure that you would benefit form the same method as the “average” person who lives where you do. This is a total no brainer if you live in a state with no income tax, or no sales tax. Don’t bother filling out the worksheet unless you bought a lot of stuff last year and you think it might tip the scale (think cars, boats, planes, home remodel, and BIG items. A $3,000 T.V. probably won’t do it.)
- Use Online Software for FREE!
- Most of the major tax prep software allow you to enter your data for free into their online programs and only charge you to print or e-File. Take advantage by putting in your data to check your work or even to do you taxes. Then, sit in front of your computer and do print screens. Go to the IRS web site and get electronic versions of the forms and just type in the numbers. No need to pay.
- Double Check Your Math
- With just about 1.5% of all tax returns being audited chances are it won’t happen to you, unless you are flagged by the computer. Computers are much better at catching some things than others and they are the best at catching bad math. Adding up three $120 charity donations and coming up with $380 is way more likely to get your return a second look than deducting the car pool to the water park as a child care expense.
- Sign Your Return
- Seriously, this is still the number one reason people foul up their taxes. The most common thing I see is when the spouse that does the taxes signs them and then plans to get the other spouse to sign them “later.” Only, they end up forgetting. To the IRS, only one person signing is the same as no one signing. When you finish have your spouse sign immediately, or put the form on the bed with a big sticky note. Just make sure they get signed.
- When In Doubt, Deduct It
- With so few returns ever subjected to even a second glance, the odds favor you taking any deduction that seems reasonable. Do NOT ever engage in fraud, or lie! But, if you are looking at a receipt and legitimately thinking that it is probably deductible, then take it. Don’t spend time looking it up. You are much more likely to make an error by rushing at the deadline if you waste all of your time looking up tax code during the days before tax day.
- Take The Extension Instead of Rushing
- If you just CAN’T get your taxes done by April 15, remember that the IRS allows one automatic [tag]extension[/tag]. No reason or explanation is required. Just file the form instead of your taxes. There is a catch. If you owe money, the money is still due on April 15 and whatever you don’t pay is subject to interest and penalties, so this is a much better option if you are expecting a refund. If you are going to owe money, and you have some kind of number send in a check for that amount. If you think it will be worse, send in some extra. For example, if you went through your taxes once and came out owing $2,000 but you need more time because you don’t think that could be right, then send in a check for $2,000. If you find a way to save on the taxes you’ll get back the extra. It is way better to have that money at the IRS not earning interest for you than it is to be earning 1.2% in your savings account while the IRS dings you with 14% plus penalty plus…
Last but not least, don’t panic. Taxes look way harder than they are. For some people they can be complicated, but if your income comes from your job, your deductions come from your mortgage, kids, and charity then your taxes probably just involve adding up the forms you got in the mail and then following instructions that look harder than they are: Compare Line 34 to Line 36 and enter the larger amount on Line 47. Come on. You can do THAT!
Take these [tag]tax tips[/tag] and get going. It won’t be so bad.
Good Luck, and May the Deductions Be With You.
IceRocket Tags: taxes,irs,deductions