Doing your taxes every year is hard enough with the difficulties of the tax code. It certainly doesn’t fit the category of exciting weekend plans. Which explains why most people put off the inevitable till the last-minute. A great idea if you still owe taxes. But if a refund is heading your way, this weekend is a great time to knock out your taxes and get that money in your hands quicker.
Here’s a few tax tips to help speed up the process, lower your tax obligation and get your return in before the tax deadline.
Use The Correct Filing Status
There are five filing statuses: single, married filing jointly, married filing separately, head of household and widow with dependent child. You may qualify for more than one. Choose the filing status that gives you the lowest tax obligation. Also, your marital status on the last day of the year determines your status for the entire year.
Double-Check Your Info
Sending in the wrong information may be an honest mistake but it only slows down the tax filing process. If you do your taxes by hand, check and double-check your math. To make sure your refund is deposited quickly double-check your Social Security number or taxpayer identification number, your current address and your bank and routing numbers. Sending the wrong information is the most common error every year. Get it right the first time and review.
Earned Income Credit
The Earned Income Credit is a tax credit for some people who work and have earned income under $49,078 for 2011. A tax credit reduces your taxes and may even give a refund. Not everyone is eligible, so look over the rules carefully before claiming the credit. The IRS offers an Interactive ETC Assistant to check your eligibility.
Student Loan Interest
Those student loan payments may actually help lower your tax obligation. If your modified adjusted gross income is less than $75,000 ($150,000 filing jointly) the potential is there to deduct up to $2,500 in interest paid and is phased out or eliminated as MAGI increases. If you paid at least $600 in interest on a student loan expect to get a Student Loan Interest Statement from your loan holder.
Make An IRA Contribution
You have until April 17, 2012 to make an IRA contribution for the 2011 tax year. If you haven’t already maxed out your contributions you still have time. A contribution to a traditional IRA is tax-deductible and lowers your taxable income. It may be enough to drop you into a lower tax bracket or cut any taxes altogether. Would you rather give the money to the IRS or your retirement account?
Cost Basis Changes
Beginning in 2011 the IRS made changes to the cost basis reporting requirements. The first of the changes covered calculating stock cost basis and took effect in 2011. With your broker now required to report all your stock transactions, the IRS has a way to check your claims.
In years past we simply waited till the end of the year to figure out our profit and loss. It’s still possible but not the best option. Going forward, we recommend tracking your tax lot sales and the profit and loss generated from each. As always, double-check the accuracy of the cost basis information you and your broker give the IRS.
eFile And Direct Deposit
Last year the IRS issued refunds to 98% of eFilers by direct deposit within 14 days. Sounds good to me. The alternative is a check in the mail in 4-6 weeks. An eFile tax return is faster and more secure. When combined with direct deposit you could get your return in as little as 10 days.