Archive for Saturday, March 27, 2010

Tips for doing taxes yourself

March 27, 2010

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Here’s some advice, if you’re planning to do your own taxes.

Tap into free software

Anyone who has made $57,000 or less can tap into the Internal Revenue Service’s Free File program. Through Free File, taxpayers are connected to about 20 software providers for free. The software prompts do-it-yourself taxpayers with questions (such as do you own a home?) to make sure they catch credits they are entitled to.

Regardless of income, the IRS also has tax forms that can be filled out and filed electronically for free. The math is done automatically in the electronic forms, which reduces the likelihood of mistakes.

To access either free software or electronic forms, go to irs.gov.

Have the basics correct

When filing tax returns online, double check social security numbers, names of dependents and bank account numbers. Remember, forgetting to sign and date a return is the equivalent of not signing a check, making it invalid.

Don’t forget Making Work Pay credit

One of the most common errors taxpayers are making this year is forgetting to file for the Making Work Pay credit. For anyone who worked in 2009, the credit is 6.2 percent of earned income, but it can’t be more than $400 (or $800 if married and filing jointly). To get the credit, taxpayers must attach a Schedule M form to their 1040 or 1040A. For people using a 1040EZ form, Line 8 must be filled out.

If you qualify and don’t file for the credit, the IRS will likely catch the mistake, but it will increase the time it takes to process your return, IRS spokesman Michael Devine said.

Know what’s changed

Paul Livingston, a tax preparer for Liberty Tax Service, said often do-it-yourself taxpayers aren’t aware of changes in the tax code that could benefit them. To get up to speed, go online to irs.gov and read what’s changed this year under the Frequently Asked Questions section.

This year state and local sales tax on the purchase of new vehicles can be included on standard deductions. Also the first $2,400 in unemployment compensation is not taxed. And, taxpayers can add up to $500 ($1,000 if filed jointly) onto their standard deduction for the amount they pay in state or local real estate taxes.

Keep track of your dependents

Brenda McFadden, owner of The McFadden Group, said each year she talks to clients whose college-aged, working children have claimed themselves as dependents at the same time their parents have. The mistake often requires parents to amend their tax returns and a four-month delay in getting a refund.

In times of change, see a tax professional

A new job, house or spouse? When life changes so does your tax return.

Elizabeth Crist, with a Jackson Hewitt franchise in Lawrence, said when dealing with major changes, it’s always a good idea to check in with a tax preparer to ensure you’re not missing anything.

Some tax preparers, like Jackson Hewitt, will look over your tax return for free to check if you are on the right track. However, tax preparers probably won’t tell you how they found $500 more in refunds without charging, Crist said.

If you can’t pay now, there are options

The IRS knows times are tough, IRS spokesman Michael Devine said. For those who don’t think they will be able to pay on April 15, Devine said they should call the IRS at 800-829-1040 to set up payment plans. The IRS also has walk-in offices in Topeka, Overland Park and Kansas City.

“Contact the IRS and ask for help. We know people are having problems and we want to help,” Devine said. “We want to make sure a bad situation doesn’t turn into a terrible situation.”

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