The Best Ways to Keep Ahead of the Game on Income Tax
By: Eileen E. Jacobs | Posted: 21st June 2011
1) Get Professional Help:
Even in the event that you prepare your personal return, at least have your taxes evaluated by an Enrolled Agent or CPA. Many professionals do that for free, and additionally, there's likely a number of tax professionals in your local area that may review the return for free. In any case, (and even if you need to compensate a professional to examine your return) get it reviewed.
The IRS states that about fifty percent of tax returns filed within the United States are generally done by individuals on their own. Of those returns, they are eighteen times more prone to mistakes when compared to those taxes which were prepared electronically by professionals. Precisely what you do not need is an audit or a sequence of letters from the Internal Revenue Service questioning exactly what you did on your taxes.
2) Take Action Prior to the End of the Year:
Whenever you pay in January regarding December's expenditures, you will forfeit the deductions on the current year's income tax return. For that reason, take some time to evaluate where you stand for your tax deductions for the year 2010 and write checks in December to get the deductions. If you do not have the money, then pay with a credit card. Both of these are appropriate for tax deductions. A credit card is the only situation that you can take a deduction in the present year and pay at a later time.
Furthermore, remember that IRAs can be paid by April 15 of the following year to be able to deduct them for the current income tax return.
3) Sell the Losers:
Any time you are holding investments of which are in a losing predicament, you should think about trading them before the end of the year. You will be able to deduct up to three thousand in losses from your W-2 wages. In the event that your losses happen to be larger than three thousand, you will be able to bring forward the losses to future income tax years until they're exhausted. See your accountant/tax professional for direction.
4) Maximize Your 401k or 403b:
Whenever you receive a wage and also your employer has a deferred contribution plan, such as a 401k system, you ought to maximize the deductions coming out of your wage checks. You won't end up paying taxes on the amount taken out in these programs. Also, if your employer contributes to the program for you, better yet.
If you think you cannot financially afford it, then contemplate altering your wage deductions by changing your W-4 form through your employer. If you desire, you can claim as many as ten dependents regarding your taxes withheld. This can keep your after taxes pay the same, and also at the same time, reduce taxes through the 401k deduction plan.
5) When in Doubt, File It:
If you happen to be one of the lucky individuals on this planet that owe no taxes, get over it quickly and file a tax return. Why? Simply because if you do not file a return, that year is accessible permanently for the IRS to examine or modify should they choose to do so. When you file a zero tax return that the Internal Revenue Service generally does not wish to receive, get it done close to year end. After three years, neither the government nor you are able to change or alter the tax return.About the Author
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Tags: credit card, money, investments, local area, wages, expenditures, irs, losses, checks, losers, tax returns, accountant, predicament, maxim, tax deductions, iras, internal revenue service, income tax return, tax professionals