Thursday, April 14, 2011

5 Tips to Save Money on Taxes

Consider these tips to make sure you don't waste money rushing to get your return in before the deadline.


File on time. Even if you can't pay all your taxes, you should file a return or an extension to avoid the penalty for not filing on time. Death, by the way, is not an excuse for missing the deadline. As executor of an estate, I filed two years of tax returns for a deceased relative. Because I filed those returns after the deadline, the deceased (actually her estate) was assessed a penalty.

Take advantage of free online filing options. Yes, you can buy tax software, and if you have a complicated return, you may need it. But if you made less than $58,000 last year, you can use Free File, a partnership between the IRS and vendors of tax software. Each company has slightly different rules. If you made more, you can use free IRS online forms.

Get free in-person help. Organizations from AARP to the IRS provide free help to taxpayers at sites around the nation. If you made less than $49,000 last year or you're over 60, volunteers will prepare your tax returns for free, so why pay someone to do it?

Find a good accountant. If you have a complicated tax return, paying an accountant or enrolled agent may save you more in taxes than you pay in fees. Just because you can do your own taxes doesn't mean that you should. Hiring a tax pro could save you not only time and money, but your sanity and your marriage. Not all tax preparers are equal and fees vary, so be sure to check out any pro you consider.

Keep good records. The tax code provides all kinds of deductions, from business mileage to energy tax credits. But you can't deduct mileage you've forgotten. That's why it's important to set up a system for the records you use to prepare your taxes. Consider a mileage log in your car, an online or computer accounting program or an old-fashioned envelope system. How you keep the records doesn't matter. What matters is that you have all the information when it's time to do your taxes.

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