Posted by Fletcher Accounting and Tax Service Inc.

Essential Tax Tips for Big Savings

Essential Tax Tips for Big Savings

It's that time of year again. Time to start thinking about tax preparation and simple ways to minimize the monetary damage come April. Everyone's tax situation is different, of course, but there are some common approaches that most taxpayers can use to minimize the dollar amount they owe the IRS, or to maximize their refunds.

Use these tactics to make sure you pay the right amount of tax and/or get the biggest legal refund possible:

Have documents ready: 

The IRS often does not require every entry to be documented, for charitable deductions as one example, but if audited you'll need to have those documents as proof of the donation. Whatever deductions you claim, be sure to have the documentation on file. Otherwise, don't take the deduction. It's not worth the possible future hassle.

Don't procrastinate:

Late filers tend to make more math errors and forget to include some types of income. That can mean unwanted scrutiny by the IRS later on. Plus, most tax-prep services charge more as you get closer to the filing day. Begin gathering your tax documents and data as soon as possible.

Know about extensions:

Keep in mind that the IRS will give a 6-month extension to anyone who asks. "Asking" means that you file a form 4868 before the official filing date. If you owe taxes, you can pay some or all of your bill with the extension request. Otherwise, what you owe will continue to accumulate interest and penalties until paid. The "extension" is an extension to file, not an extension to pay.

Consider online filing:

Many online filing methods are very low-cost. Some are free if you fall into certain income categories. You can visit the website and find out which online filers are approved by the government. It's also smart to use direct deposit or automatic withdrawal for tax refunds or taxes owed. That way, your bill will be paid quickly, or you'll get your refund, if you have one coming, within a few business days.

Use a professional preparer if you need help:

Make sure the preparer you hire has a PTIN and preferably is an EA. The PTIN means the person is officially recognized by the IRS as a preparer. The EA designation means the preparer is an "Enrolled Agent," and has taken extensive, IRS-approved coursework as training for becoming a tax professional.

The Last Word

Though not strictly categorized as a "tax strategy," it pays to remember one very simple, last chore: Triple-check your math. The IRS says that up to 20 percent of all self-filed returns contain math errors, about half of which work against the taxpayer. In other words, about 10 percent of us are over-paying as a result of easy-to-avoid addition or subtraction mistakes.

The solution? Run through the math yourself after the return is complete. Then, ask a trusted friend or family member to check your accuracy. Finally, re-check the numbers before sealing the envelope or pressing "transmit."

It pays to be careful, especially when your money is at stake.

Fletcher Accounting and Tax Service Inc.
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