If you are like me, you’ll probably wait until the very last minute to file your taxes. It’s time to get focused. Filing quickly can cause you to miss out on opportunities to earn a bigger refund or even lower what you owe the IRS come April 18th.
There are two types of people when if comes to filing taxes; those who file as early as possible, and those who wait until the last minute. Which direction is better? Well, I was able to find this February 2010 study from Intuit tax software TurboTax, which found that 82% of early filers received tax refunds. No percentage was given to those who filed late. So, what does that mean for the people that are just now looking at doing their taxes? Well, first, don’t rush, and second consider these tips as a way to reduce your taxes this season.
You Don’t Have to Do It Alone, Consider Paying Someone
Filing for taxes can be easy, but knowing all the ins and outs to cashing in on any deductions is not always the case. Things can get even more complex, when you add a spouse, child and in some situations a business. It’s okay to pay someone to handle your taxes, I do. Personally, taxes can be stressful and so I would keep peace of mind knowing that they are done correctly.
Claim Making Work Pay Credit
In 2009, when President Obama signed the Stimulus Act, he also added an additional tax claim, the Making Work Pay Credit (MWPC). The MWPC, allows unmarried workers an opportunity to earn a credit of as much as $400 who make an Adjusted Gross Income (AGI) of less than $75,000 and $800 for a married couple who joint-file for less than $150,000. To claim the MWPC, you will need to complete a Schedule M (Making Work Pay Credit).
Deducting Expenses for Job Searching and Moving to Take a New Job
With unemployment breaking 10% in 2010, this deduction could be a large savings for a number of people this year.
For those who spent a part of the year looking for a new job (cannot be their first), your costs associated with travel, printing, calls and postage could be deductible. Place these itemized costs under “Miscellaneous Itemized Deductions,” (Tax Form: Schedule A) and make sure they exceed 2% of your AGI or they won’t be counted.
If you fall short, consider adding costs to union dues and business expenses.
For those who had to move once they found a new job, there is an opportunity to earn an additional deduction. This savings can also be helpful for those who didn’t itemize their job-hunting expenses or are starting their first job. To apply this deduction on your taxes review Form3903, but essentially you must have traveled 50 miles from the location of your old job (or home).
- Moving of household goods and personal effects
- Mileage to move your car
- Temporary housing during the move
Points Paid on Home Purchases or Refinancing
With mortgages rates on 30-year loans dropping below 5%, you may have taken advantage of this opportunity to purchase a home or refinance. If you did so in 2010 and paid points, you are eligible for a deductible.
The deduction is a little different depending on if you purchased or refinances. For those who purchased a home in 2010, any points paid are fully deductible, where those who refinanced must spread the cost of the points over the length of the loan.
For example, $2,000 in points on 30-year mortgage refinanced would equal to $66.66 a year (Formula: $2,000/30-year).
Disaster expenses or losses in 2011
2011 sure did bring a number of storms across the United States. If you were one of the many who received federal disaster relief and did not receive compensation from an insurance company, than you can opt to deduct your 2011 itemized losses up to $100 and 10 percent of your adjusted gross income.
Tax season is the perfect time to keep from paying the IRS and starting your retirement fund. If you end up owing, or had a bigger earnings year, instead of forking over the cash, consider opening an IRA. You can contribute up to $5,000, as long as it is completed before the tax deadline and filing extension will not give you more time.
Filing for an Extension is Okay
If all else fails and you feel you need more time, don’t freak out, just file for an extension. For those who own their own business, sometimes, this is the best approach. Your business taxes can take time and just like you shouldn’t rush these taxes, the same goes for your own.
While there is rumors that filing for an extension can put you on the IRS’s radar, this isn’t true. Using the Form 4868, you can extended the submission period by six-months. It is important to note, that this extension does not give you more time to pay and so if you owe, payments should be made on April 18, 2011.
Alexander Matjanec is a Co-Founder of MyBanktracker, who specializes in banking trends and consumer financial products.