File Your Taxes Efficiently with These Tips

With advances in technology, filing and paying your taxes has become really easy. I filed online using H&R Block’s free e-filing option. It was really easy and took me less than an hour, and I got way more than I was expecting!

Gather the paperwork Taxes are all about paperwork and proof. Make sure you have the forms and the documents needed to back up your filing.

  • Collect proof of income – This includes W-2 forms from your employer(s) and any 1099 forms for independent work or investment income. Be sure to dig up last year’s tax return as you may need to provide some of that information depending on how you file
  • Track down receipts – If you’re filing for certain credits or deductions, you will also need receipts to prove certain purchases or payments. These include medical expenses, home renovations and business expenses if you’re self employed.
  • Find the forms – The IRS has stopped mailing paper tax packages, but forms can be downloaded free at the IRS web site. There are also tax assistance centers across the country where taxpayers can pick up IRS forms and publications. State forms, and instructions for filling them, are found on the website for your state.

Choose the right tools The IRS has been encouraging e-filing, which can be faster and easier to verify. You just have to find the right program.

  • Check free options If your income is $58,000 or less, you may qualify to file with one of 20 tax software companies that make their products available for free here. You should also be able to file 1040EZ and simple tax returns free through websites such as Turbo Tax and H&R Block. If you make too much to qualify for the free e-file, the IRS has “free file fillable forms” which are online versions of paper forms and can be e-filed free. H&R Block has a great free expert advice and free audit support.
  • Use the web H&R Block, Jackson Hewitt and TurboTax also offer paid online services for taxpayers with more complex returns. Prices range roughly from $30 to $150, depending on factors like home ownership, investment income and business ownership. You may be asked for the adjusted gross income from the previous year–a number that can be found in last year’s tax return. There is also software to help with specific calculations. For example, you can get help calculating the cost basis of old stock at NetBasis.com. SmartMoney also has tools for estimating taxes.

What NOT to do  when doing your own taxes.

  • Don’t forget to file – If you don’t owe taxes, the IRS is more lenient about you missing the April 15 deadline. But be aware you only have three years to claim a refund. On the other hand, the IRS can always come after you for taxes owed, and interest charges and penalties accrue from the due date, even if you file later.
  • Don’t miss out on eligible credits – Both the American Opportunity credit (maximum $2,500 for 2011) and the Lifetime Learning credit (maximum $2,000) help soften the cost of postsecondary education. The American Opportunity credit is available only for the first four years of college, while the Lifetime Learning credit can be used at any time and doesn’t have a degree or workload requirement.
  • Don’t file forms you can’t understand – If you aren’t sure what the requirements are for a deduction or credit or other tax form, get professional help. The IRS will flag you for an audit if something doesn’t add up, and they can look back to previous years.

Source: SmartMoney

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