Like most things in life, preparation is the key to success, and filing your federal income tax is no exception. By preparing your file, doing your research and reading up on the latest changes to the tax codes, you can not only lower the amount you owe but actually maximize your chances for a refund.
You’ve no doubt seen the news reports showing frenzied tax filers rushing to the post office at midnight on April 15 to meet the IRS deadline.
Planning your federal tax return carefully will not only help you avoid that last minute rush, but give you the time to review your return to make sure you’re getting the biggest refund possible.
According to a consumer credit professional, planning your tax return carefully can help avoid costly mistakes. Taxed that go unpaid, they said, can permit the IRS to place a lien on your property and other assets, and that unpaid tax liens can stay on your credit report for as many as 15 years and that tax liens that are paid can stay on your credit report for seven years.
So it’s important to begin your tax preparation as soon as the tax season (January to April 15) begins. Amasses all of your important paperwork as soon as possible: your W-2 forms, your receipts, your past tax forms for reference, etc. Having all of this material readily available will save you hours of frantic searching.
Next, familiarize yourself with the current tax laws. Since the laws can change each year, your allowable deductions may change as well, so do your research and study the available books and other material available online to find out the newest rules.
Assess your current situation. Have there been any major changes in your life? Major changes could mean new possible deductions that were not available to you in the past. Or you may qualify for an increased deduction in some areas. Some areas of deductions you may wish to look at closely include charitable donations (including clothes and household items that you have donated), state and local sales taxes, disaster deductions or theft deductions (damage by floods, earthquakes, ice storms or burglary that is not covered by insurance), education expenses (job training programs and classes to improve your work skills), expenses related to a job search, real estate (mortgage interest, a refinanced loan, or the sale of a house, etc.), medical expenses and, yes, even expenses related to tax preparation.
Consult with a qualified tax professional to make sure you are getting the most deductions you are qualified to receive. Don’t take it for granted that you know what you are able to deduct. There are a number of semi-obscure areas that are eligible for deductions.
But before you list any deductions, make sure you have the paperwork to back it up. Keep the receipt to the big-ticket items that you have purchased over the past year: appliances that meet energy efficient requirements (and are eligible for a tax credit), improvements to your home such as new windows and doors that are also energy efficient. Tax credits are even available on certain models of cars that meet U.S. energy standards.
Finally, here are some simple steps to get the most from your tax refund:
- File as soon as possible. The soon you start the filing process, the more time you will have to make sure everything is correct and all of the possible deductions have been applied. And filing early means you will get your refund that much quicker.
- Double-check your work. By double-checking your work, you not only ensure that you have applied for as many deductions and credits as you can, but you can fix any mistakes and avoid the possibility of an audit. If possible, have your spouse, a friend or a tax expert double-check your work.
- Use tax software. By using the latest version of the available tax software, you can be assured you are getting the maximum deductions and the maximum refund. Many of the tax software programs on the market also provide free online help as well, so help is just a phone call or an email away.
- Consult a tax professional. It may be a source of pride to know that you completed your tax form yourself, but for complicated forms, it might be better to leave it to the professionals. A professional tax preparer can find the deductions that you might have missed, as well as the errors you might have made. If you are preparing the taxes for your business, you make want to seek the help of a professional well versed in the tax laws concerning your business.