Thursday, March 26, 2009

Tips for making tax time easier

Over at Work It, Mom! I'm taking on the tax man... or, at least, sharing a few tips and tricks for helping you cope at tax time.

By far, the best tip is to stay as organized as you can; filing your recipts and other tax-related documents as they arrive makes a big difference at tax time. If you can keep several folders at the ready and sort documents, not just file them, throughout the year, you'll be able to whip through that 1040 easily.

Here are nine more tips for taming the tax monster:

Evaluate your deductions. The standard deduction is easy to take, but you may save more money if you itemize -- especially if you work at home and can deduct part of your operating expenses. Take a look at this list of commonly overlooked tax deductions to make sure you aren't missing anything!

Double check your tax credits. You may be eligible for a tax credit of up to $1,000 for each dependent child under the age of 17 in your household. Check to see if you’re eligible for other tax credits as well.

Consider taking a loss. If it’s close to the end of the year and you’re looking at a potentially significant capital gain, consider unloading a less profitable investment and offsetting the gain with a loss (don’t forget that you can carry forward up to $3,000 in losses from previous years).

Stay up-to-date. Talk to your tax preparer or, if you’re going it alone, make sure you have the latest software -- it doesn’t have to cost a bundle (and, in many cases, the cost is tax deductible).
File online. The Internal Revenue Service offers a free electronic filing program for taxpayers with adjusted gross incomes of less than $56,000 in 2008. And this year, many Massachusetts residents can file their 2008 state taxes online, too.

Don’t forget about your unreimbursed business expenses. Things like union dues, travel expenses, and research materials may be deductible. Check with the IRS for details.

Sole Proprietor? If you received a 1099-Misc, the government considers you a business, even if you don't think of yourself as one. Understand your quarterly tax payment responsibilities. IRS publication 505 is required reading if you ran your own unincorporated business.

Take a little more time. File for an extension and you can work on your taxes for a few months after tax day. Just remember: An extension to file is not the same as an extension to pay. If you think you might owe money, you'll still have to pay all or part of your estimated taxes.

Being audited? Don’t panic. If a professional prepared your taxes that year, give him IRS Power of attorney and sit back and relax. Did your taxes yourself? Relax: it might not be as bad as you think. Check out’s tips for coping with the audit process.

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