Spring is in the air, which means you need to file your taxes. In celebration of tax season here’s some top tax tips that you may have heard before but are worth reviewing.
Spring is in the air, which means you need to file your taxes. Good news is that you have until April 17th this year because the 15th is a Sunday and in DC they are busy celebrating Emancipation Day on the 16th.
In celebration of tax season I’ve compiled some top tax tips that you may have heard before but are worth reviewing.
— ∮∮∮ —
Check their credentials
First off, I’m sure you’ve heard of your buddy’s tax guy who can get anyone a huge return. That is all well and good but be sure to remember that you, the taxpayer, are legally responsible for what is on your tax return regardless of if you paid someone else to prepare it. If you pay a preparer check their credentials. Anyone who prepares tax returns for compensation is now required by law to have a Preparer Tax Identification number. And remember: never ever sign a blank return.
Let’s say you’ve decided to tackle the job yourself. Did you know that if you made less than $57,000 last year you qualify for free tax-filing software made available through a partnership between the government and certain software manufacturers? Check out “free file” on the IRS website to see your options.
It doesn’t cost you anything to file an extension, but if you do you’ll still owe the taxes that are due now–you are only putting off the actual filing. You will need to make an estimate of what is due and pay that by the April deadline. Overpayment is OK, but underpayment comes with fees.
Avoid the failure-to-file penalty
Times are hard and you could be in the situation that you are putting off filing your taxes because you know you can’t pay what is due. The IRS has installment payment plans that do include interest, but it is a better route than not filing and accruing extra penalties.
Choosing your filing status
Choosing your filing status is the first decisions you need to make when preparing your taxes, but this is actually one of the hardest things about filing. Tax preparers say that it’s usually the number one question they are asked and the rules are complicated. Married filing separately (MFS) sounds like an intriguing option, but it actually doesn’t benefit most people. The MFS status has the least financial benefits because you miss out on a slew of deductions, including student loan interest, tuition, and dependent care credit to name a few. The only reason you would want to use the MFS filing status is if you don’t trust what your spouse is up to–i.e. you suspect they are evading taxes. If you suspect his or her return to be inaccurate and do not want to assume responsibility in an audit by the IRS for the information presented, then go ahead and file separately. This relieves you from the liability of unpaid taxes due on a joint return that will come with penalties and interest. If you don’t suspect anything like this then file jointly.
Claim your dependents
After status, the second most popular question people have regarding tax filing is claiming dependents. A dependent is someone that you take care of and claiming them on your taxes will increase your personal exemptions, possibly qualifying you for more tax benefits. Again, the rules are complicated and detailed, but one important thing to remember is that only one person can claim a dependent on their tax returns. It is not just children that can be claimed as dependents so if you aren’t sure look into the criteria. On a related note: child support is not a tax-deductible expense and is also not taxable income for the recipient.
Make sure you sign your return
Finally, though it may sound obvious, a very common mistake is forgetting to sign your return. Also make sure if you are e-filing that your direct deposit information is correct–one wrong digit in your account or routing number means a delay in getting your refund.
Good luck and happy tax filing!