If you haven’t filed your federal and state tax return, it’s time to get the pencil sharpened up.
130 million tax returns will be filed this year, and of those, about 40 million are going to be filed this week. But there are a couple of things you can do to help you avoid that midnight dash to the post office.
With two new tax laws on the books, the number of people using paid tax preparers to complete their return is growing.
“Last year, 60 percent of all returns went to a paid preparer,” says Mike Lister, Jackson Hewitt Tax Service.
“There was a time when I made an attempt at doing it myself, but I said, ‘hey, I’ll leave that to the professionals,'” says Eric Carrillo, tax payer.
But more than 50 million Americans will still file their taxes solo, many using free software available online at www.irs.gov. Using software and filing online helps keep track of the myriad of changes to the tax laws each year.
“The tax laws do not remain stagnant. You want to make sure that you not only get your tax return right, you want to make sure you are taking advantage of all the deductions and credits that you have available to you,” Lister says.
Taking advantage of deductions for everything from job-hunting and moving expenses to charitable contributions or the mortgage interest you paid last year means keeping track of the paperwork to back up what you’re planning to write off.
But this is where a year of sloppy book-keeping can come back to haunt you. “I do a little bit of consulting work and you have mileage and different little expenses that come along with it. It’s just keeping it together. I guess I don’t keep very good records,” says Ellis Godwin, tax payer.
The good news is that your records may actually be better than you think. “Our experience has been you really do have a lot of the things you need to get going,” Lister says.
If you don’t know what deductions you can take, the IRS’s website offers hundreds of publications that explain the deductions available for each profession.
“If you’re a teacher, you can take an adjustment to your income for expenses that you put into the classroom for the year,” Lister says.
Did you give someone a gift this year. Many taxpayers don’t realize that if they give a gift to an individual worth more than $11,000, they must file a gift tax return.
“There may not be any tax due because right now, every individual has a $1 million credit that they can give over and above the $11,000 to an individual but you still have the filing requirement,” says Gregg Simon, Much Shelist.
Filing electronically, or online, means you’ll get your refund in 10 days or less if you sign up for direct deposit. But if you really don’t have all the information you need to file, filing for an automatic extension is easy. You can download the paperwork you need at irs.gov and either file through the mail, online or even over the phone.
“This time of year, you gotta get it filed. There are lots of penalties besides monetary. Get it done or get it extended,” Simon says.
Tax scams abound this time of year, and in a new twist, the IRS says valid children’s social security numbers are being poached, sold and attached to someone else’s return in order to collect a bigger refund. If this happens to you, it will bounce your return and you’ll need to contact the IRS immediately.
Published: Apr 14, 2005