Some people look forward to January and large refunds but there are a lot of folks – like me – who’ll put off filing a return until the April deadline. Whichever end of the spectrum you fall on, there are some things to take into consideration before filing your return and most of them need to be done by 12/31 in order to be honored by the Internal Revenue Service.
New gig. If you relocated for a new job, the IRS has potential tax breaks in store for you. There are time and distance criteria that you must meet (unless you’re in the military) but this is worth looking into especially if you had a lot of moving expenses. They’ll be taken into consideration when calculating your Adjusted Gross Income for the year. Check here for details.
Unfortunate events. If you had any qualifying casualties or theft throughout the year, the IRS may take them into consideration when figuring your tax amount. If you were affected by natural disasters, Ponzi schemes or even a robbery you should look into this publication for more information.
Get married. Just saying. Getting hitched can lower your taxes and increase eligible credit amounts on your tax return. As long as you’re married by 12/31, you can claim a Married Filing Jointly status on your tax return for that entire year. So, it’s not too late if you and bae are ready to tie that knot!
Besides lowering your taxes for the year, there are some other things that you should and shouldn’t do to make filing season less of a headache and keep you out of trouble with the IRS.
Check debts. Have you ever been expecting a nice refund only to find that it was snatched to cover an outstanding liability? State taxes, child support and student loans are a few examples of debts that your federal refunds can be intercepted for. You can call the Bureau of Fiscal Services at 800-304-3107 to find out if any such debts are attached to your SSN. Even though your federal refund could go to them, it’s much better to know this is advance than to be hit with the news while waiting for your money. I DO NOT recommend skipping the filing of a return to keep any debtors from taking your money. That leads to more problems with the IRS.
Be honest. Don’t claim other people’s children to get a higher refund. Don’t exaggerate your business costs. Don’t exclude income that you earned. Simply put – don’t lie on your tax return and don’t let a tax preparer talk you into doing it either. FYI the IRS treats your tax return like a legal document and you have might have to answer for what’s on it regardless of what anyone tells you. And believe me, you don’t want to wind up in an examinations process with the IRS!
DIY. Speaking of tax preparers…you should try preparing your tax return on your own. Tax professionals charge hefty fees and it’s not usually worth it. If you have a simple tax return (W2 only), tax preparation software has become so user friendly that you may be able to figure it out on your own. Doing your own taxes saves you time, saves you money and helps you understand your liabilities a lot better.
Calculate your withholding. IRS has an online calculator that helps you estimate what your tax liability might be for the year. You enter information from a recent pay stub and it’ll tell you if you need to have more taxes withheld from your paychecks, if you’re having too much taken out or if you’re right on track. Get started here.
Don’t ignore issues. If you wind up in a compromising position with the IRS, don’t think it’ll go away if you just ignore them and toss their letters. You’ll be faced with bigger consequences down the road. People that I’ve talked to are spooked by the IRS but they really aren’t that scary. Call them and see what your options are.
Claim old refunds. If you realize that you’re entitled to more money after you file your original tax return, you can file an amended return to claim the additional refund. The IRS has a statute of limitations on this so file your amendment as soon as you realize the need to do so. You can read more about the rules here.
With filing season coming soon, now is the time to start putting some thought into your tax return and making sure that you have everything together. Do you usually look forward to tax season or dread it?