10 Income Tax Tips
Looking for 10 income tax tips that can help you receive a bigger income tax return and make filing less of a headache? After reading these tips, hopefully more people will find the tax filing process more tolerable.
Keep your tax documents together (and organized). It is a good practice to keep incoming documents that will be needed for tax preparation in the same place. When tax time comes and people have to look all over to find what they need to file, it only prolongs the process and makes it frustrating. It would be great to actually subdivide and organize the papers, perhaps by keeping W-2s, bank statements and similar documents together. However, this is not totally necessary. It is necessary to keep up with the needed paperwork.
- Use tax preparation software if filing taxes yourself. Yes, it is hard to believe, but people still prepare income tax returns by hand. They fill out forms and perform calculations themselves. It is much easier and faster to use a tax preparation software, either one that can be downloaded to a computer or one that can be used online.
- E-file the return. E-filing income tax returns allows taxpayers to receive refunds in half the time it would take if they mailed in a paper return. It also saves trees and postage costs.
- Elect to have the refund amount direct deposited. Direct deposit also helps you receive your refund faster. It takes much longer for the IRS to mail out a paper check.
- Check out Free File. If your income is $57,000 or less, you may qualify for free tax preparation software and electronic filing. The IRS partners with several tax preparation companies to provide these services.
- Print and double check the return before filing. Print out and review the return before filing. Incorrect information may require and amendment or may delay the acceptance of the return by the IRS. Please try to get everything right the first time.
- Use your resources. If there is a question regarding a return, please view the IRS website for clarification or call the IRS. The IRS telephone number is (800) 829-1040.
Take an income tax preparation course. Some taxpayers feel more comfortable having their taxes prepared by an income tax professional. It is a good idea, however, to have some knowledge of how the tax system works. Most local tax preparation franchises offer tax preparation classes beginning in September or October. They do it to find and train potential employees for the upcoming tax season. Taking a class can be a good opportunity to learn how to prepare income taxes and to have your tax questions answered by the instructor.
Avoid tax refund anticipation loans. Many companies offer consumers loans (provided by banks) on their expected refund amount. The loans allow taxpayers to receive money quickly; however, there are hefty fees. Sometimes the APR on an anticipation loan can be over 200%. By e-filing and using direct deposit, hopefully more taxpayers will say no to the refund anticipation loan offers.
- Adjust W-4 withholdings if necessary. If you receive a huge income tax refund and wish you could have that money during the year, you may want to adjust your W-4 withholdings. The W-4 form is the form that tells an employer how much federal income tax to withhold. With the right exemptions, a taxpayer can put more money into his pocket every paycheck so that he doesn’t have a big refund just once a year. Keep in mind, adjusting withholdings too much can put a taxpayer at risk of owing money to the IRS at the end of the year. There are W-4 calculators available to help taxpayers determine how to proceed.
Posted on: Apr. 27, 2010