10 Ways to Save Money on Your Tax Return
It's that time of year. Here's how to prepare and save!
Talk to your accountant about how you can save (Image: Thinkstock)
Call it revenge of the nerds. This is the time of year when former math majors and calculator-toting accountants become our closest friends. It’s tax time–and as of today you have just one month to go before your tax returns are due. If you haven’t filed yet, the National Society of Accountants (NSA) wants you to know that there are still plenty of last-minute strategies you can use to save money on your 2010 tax return.
Here are 10 ways to save this tax season, courtesy of our friends at the NSA:
- Contribute to a traditional IRA. You can make contributions to a traditional Individual Retirement Account (IRA) that are deductible on your 2010 return any time before April 18, 2011 – and can even set up the account now if you don’t have one already.
- Organize your records. Print out a tax checklist to help you gather all the tax documents you’ll need and keep all the information that comes in the mail in January, such as W-2s, 1099s and mortgage interest statements. Collect receipts and information that you have piled up during the year.
- Find the right forms. You probably won’t find all of them at the post office and library, so go right to the source online. You can view and download a large catalog of forms and publications at the Internal Revenue Service Web site or have them sent to you by mail.
- Itemize. Sometimes taxpayers overlook miscellaneous expenses that are deductible if the combined amount adds up to more than two percent of your adjusted gross income. These include tax-preparation fees, job-hunting expenses, business car expenses and professional dues and a portion of your medical expenses if they exceed 7.5 percent of your adjusted gross income.
- Don’t shy away from a home office deduction. People who have no fixed location for their businesses can now claim a home office deduction if they use the space for administrative or management activities, even if they don’t meet clients there. You can write off a percentage of home office expenses such as rent, utilities, insurance and housekeeping based on the ratio of the square footage of the office to the total area of the house.
- Get your charitable house in order. A charitable cash contribution must be documented to be deductible. If you claim a charitable deduction of over $500 in donated property, you must attach Form 8283.
- Provide dependent taxpayer IDs on your return. Be sure to plug in Taxpayer Identification Numbers (usually Social Security numbers) for your children and other dependents on your return. Otherwise, the IRS will deny the personal exemption of $3,650 for each dependent and the $1,000 child tax credit for each child under age 17.
- File and pay on time. Taxpayers have until Monday, April 18 to file their returns and pay tax but if you can’t finish your return on time, make sure you file Form 4868 by the filing date to give you a six-month extension. Remember, by the filing deadline you must have paid at least 90 percent of your 2010 tax liability.
- Consider filing electronically. Because the IRS processes electronic returns faster than paper ones, you can expect to get your refund three to six weeks earlier. Plus, the IRS checks your return to make sure that it is complete, which increases your chances of filing an accurate return. Less than one percent of electronic returns have errors, compared with 20 percent of paper returns.
- Hire an accountant or professional tax preparer to do your taxes. Because constant changes make the tax code more complex each year, you may be more comfortable – and get a bigger refund – if you have a professional prepare your returns. NSA offers an online search directory to identify a qualified tax preparer in your area. Visit www.nsacct.org and click on “Find a Professional” or call 800-966-6679.
SOURCE: National Society of Accountants