Oh, if only taxes were as easy as landing on a spot on a monopoly board and paying $200 (that you’d automatically get back after passing “Go” of course…)
While the tax deadline (*Editor’s update: April 15, 2014*) may seem far off, it’s closer than we’d like to believe. And there’s nothing more stressful than struggling to prepare to file while the deadline approaches at lightening speed. Getting started early can not only save you stress later on, but can ensure that you are thorough and get the refund you deserve.
Here are some general tips to help you get started on those taxes, save as much time as possible preparing them, and earn the most money back on your refund (or at least avoid paying an arm and a leg to the IRS):
- Print out a tax checklist so you know exactly what you have to bring to your appointment/have in your possession if you’re doing your taxes yourself.
- Figure out where you’re going to put tax-related documents and keep all the information that you collect from the mail together. Be sure not to throw away anything that could be a tax-related document. When in doubt, save!
- Take the time to review your documents as they come in. You’ll want to be aware of any potential mistakes before the filing deadline approaches.
- Collect receipts that you’ve kept throughout the year that you’ll need for possible deductions.
Make a List of Job-Related Expenses
You’re going to want to have a clear idea of the expenses you can deduct because they relate to your job. Expenses that are a result of things like professional training, business travel, job hunting and other unreimbursed employee expenses need to be taken into account. As long as these miscellaneous expenses account for more than 2% of your adjusted gross income, you’ll be able to deduct them.
It will also be helpful to you to take a look at last year’s tax return. Chances are that you can qualify for some of the same deductions that you did last year. You can add to or subtract from the list, but at least you’ll have an idea of where to start.
Home Office Deductions
If you legitimately qualify for a home office deduction, meaning that you have no fixed location for your business, you definitely shouldn’t shy away from a home office deduction. By doing this, you can write off expenses that are associated with the part of your home devoted to conducting business, i.e. rent, utilities, insurance, housekeeping, office supplies and needs, and more. According to TurboTax,
A middle-class taxpayer who uses a home office and pays $1,000 a month for a two-bedroom apartment and uses one bedroom exclusively as a home office can easily save $1,000 in taxes a year. People in higher tax brackets with greater expenses can save even more.
Learn more about preparing to claim the home office tax break over here.
Tally Up Your Charitable Donations
The charitable donations you made in 2011 can certainly help you earn more (or pay less) when it comes to your tax refund. Gather all paperwork that has to do with donations that you made, whether they were clothing, stock or cash donations. Tax-deductible donations can be a big help as long as you can back them up.
Contribute to Your Retirement Accounts
Didn’t contribute to your retirement accounts by December 31? That’s ok! There’s still time to take advantage of deductible contributions:
Making a deductible contribution will help you lower your tax bill this year. Plus, your contributions will compound tax-deferred. It’s hard to find a better deal. If you put away $5,000 a year for 20 years in an investment with an average annual 8 percent return, your $100,000 in contributions will grow to $247,000. The same investment in a taxable account would grow to only about $194,000 if you’re in the 25 percent federal tax bracket (and even less if you live in a state with a state income tax to bite into your return).
To qualify for the full annual IRA deduction in 2011, you must either: 1) not be eligible to participate in a company retirement plan, or 2) if you are eligible, you must have adjusted gross income of $56,000 or less for singles, or $89,000 or less for married couples filing jointly. If you are not eligible for a company plan but your spouse is, your traditional IRA contribution is fully-deductible as long as your combined gross income does not exceed $167,000.
Get Your Refund Fast
- E-file Your Taxes: this is the quickest way to get your refund fast, as filing by paper means waiting at least 4 weeks to get the status of your refund. If you’re filing for yourself, here are some great free options:
- Use Direct Deposit: simply provide the IRS with your account and routing number to get your money quickly deposited to the account of your choice. You’ll not only save time in getting your refund but you’ll ensure that the check won’t get lost of stolen in the mail.
Checking the Status of Your Refund
To check on the status of this refund, all you have to do is go to the IRS website and click on “Where’s My Refund“. Then, just type in your social security number, your filing status and the amount you were expecting. If you don’t want to check the status ee=lectronically, you can call the IRS directly at 1-800-829-4477.
Head over to Consumerism Commentary where they have a complete chart of each state’s revenue department phone numbers.
Have any beginning of the year tax-related tips you’d like to share? Please do so in the comments section below. Thanks for being a Tip Hero!