BY NELLIE AKALP
It’s that time of year again: the W2 and 1099 forms have all been sent out. You're staring at a new collection of tax forms, and it’s peak season for the tax prep software industry and accountants.
Have you wondered if you are one of those Americans who have left money on the table by overpaying your bill to Uncle Sam? Most likely, you want to do all you can to get as big a refund (or pay as little as possible) this year. Here are six simple filing fixes to help you put more money in your wallet this year:
1. Turn to the pros
With all the tax preparation apps available these days, it has become easier than ever to file your own taxes. But paying a tax professional $100-$500 can really pay off if they can boost your refund by a thousand or more. Tax pros are savvier about which deductions, filing status, and credits will work in your favor. And as tax laws change frequently, and credits and allowable deductions come and go, a professional has kept up with these changes and how they affect your cash flow.
If you'd like to meet with a professional, do it as soon as you can as we're already well into their busy season. This meeting will be particularly valuable if you had any major changes in 2013, such as starting a business or side business.
2. Know your expenses
Racking up all your deductible expenses is the most effective way to bring down your taxable income and overall tax bill.
For example, you may be able to deduct up to $4,000 for tuition-related expenses. If you were looking for a new job in 2013, you may be able to deduct expenses related to the job hunt. Other potential deductions include: mortgage interest and property taxes, state income taxes, moving expenses related to a new job, healthcare costs, upgrades to make your home more energy efficient, and business travel expenses.
3. Get savvy about your filing status
Most people don’t think twice when they check their filing status (i.e. single people file as an individual and married couples check married-filing-jointly). However, your filing status can significantly impact your refund's size, so it’s good to make an informed decision. If you are married, it's smart to calculate your taxes both as a joint return and as married-filing-separately and see which gives you a better result.
Yes, this process is more time-consuming (particularly if you are doing taxes yourself), but it can really pay off. If you're using tax prep software, check to see if it will automatically calculate your taxes using both methods.
4. Think about extra IRA contributions
While it’s typically too late by now to make any financial moves to impact your 2013 return, IRAs are one exception. You have until April 15, 2014 to make any contributions to a traditional IRA and Roth IRA and have them apply for the 2013 tax return. Of course, you need to be within your allowable limit for max contributions for the year. If you have a qualified 401(k) plan, the deadline for all contributions was Dec. 31, 2013.
5. Add up your charitable contributions
If you are itemizing your deductions, don't forget to include any charitable donations made throughout the year. It's easy to remember any big donation, but your little philanthropic gestures can add up too.
Did you make any text message donations last year? Did you clean out your closet or garage and donate items to a charity? If you volunteered for a qualified charitable organization in 2013, you can't deduct the value of your time, but you can deduct miscellaneous expenses like your travel costs or the ingredients needed to bake something for a bake sale or soup kitchen. IRS Pub 526 will help you figure out just want can and can't be deducted.
6. Don't forget the credits
While deductions work by lowering your taxable income, credits have an even bigger impact. That’s because every dollar in tax credits equals a dollar in refund (or one less dollar you need to pay in taxes).
You may be able to qualify for the Earned Income Tax Credit (check here to see eligibility). You can also qualify for childcare credit if you needed someone to look after your kids while you worked or looked for work. There’s also a Lifetime Learning Credit for post-secondary education (you don't need to be pursuing a degree). And, if you’re paying tuition costs and other college-related fees for yourself or a dependent, be sure to check out the American Opportunity Tax Credit.
Don't wait until the last minute to start preparing your taxes, as you'll want to give yourself or your tax advisor as much time as possible to find the most deductions, credits, and best filing strategies. And, be sure to apply any lessons learned with your 2013 return to your 2014 tax planning.