Tax season is approaching, and those year-end tax forms usually come out of nowhere every January. Before you're blindsided by the New Year, make sure you have your financial house in order – especially when it's involving your taxes.
1. Organize Receipts Before You File
If you weren't very organized throughout the year, take a few weeks to get things in order. You don't want to wait until you're sitting down with your tax forms before you organize all your receipts and paperwork.
Here are a few things you should be getting ready to access:
- Medical Receipts – Did you know that qualified medical expenses that exceed 7.5% of your AGI (adjusted gross income) could be tax deductible?
- Charitable giving receipts. Did you donate clothing or money to qualified charities? Make sure you have documentation, and you might be able to take a tax deduction.
- Tuition receipts and expense receipts. Did you or a child go to college in 2011? If so, you could be eligible to receive a nice tax credit to the tune of $2,000 – part of the Lifetime Learning Credit.
- Business expense receipts – If you ran your own home business this year, you can deduct a portion (and sometimes all) of qualified business expenses. Make sure you keep all receipts and bring them to your tax preparer. This could save you hundreds if not thousands of dollars in taxes owed.
2. Max Out Retirement Accounts
If you can afford to max out your 401(k) or 403(b), you should definitely get on that right away. The 2011 401(k) and 403(b) retirement contribution maximum is $16,500, plus a $5,000 catch-up if you're over 50.
A more reasonable goal would be to max out an IRA. The maximum you can save with an IRA is $5,000 ($6,000 if you're over 50). But there's not so much of a rush on this, because you can actually make a contribution for 2011 until April 15, 2012.
Also, remember that you can make an IRA contribution even if you're not working. As long as your spouse has an income to cover the contributions, and you're filing jointly, you can both max out an IRA based off your spouse's income.
3. File Your Taxes for Free
The library still offers free tax forms, so this is always available. But I know you're a little more tech savvy than that, so here are some good alternatives you should take advantage of.
Turbo Tax Free
Turbo tax allows you to file your federal tax return for free if you're filing a simple return. If your return is more complicated (want to take unique deductions, have a home business, rental properties, or real estate) you'll need to pay for a premium Turbo Tax service. These can range from $29.95 to $129.95.
If you want to file your state tax return online with Turbo Tax, you'll be paying about $27.95 to do so. My suggestion is to work through the state tax preparation and to NOT submit it via Turbo Tax. Go to the library and get a state tax return form. Then complete it as you see on the Turbo Tax screen. You can mail it in and end the Turbo Tax session. I don't have a problem with this ethically because you're simply paying for the convenience of Turbo Tax to send the paperwork out. You can do this part and save $27.95!
Tax Act Free
Another great online tax service is Tax Act. They're very similar to Turbo Tax, and they're a little cheaper when it comes to filing your state tax return. The interface is a little different, but the end result should be the same.
But don't sign up right away, because there are always discounts if you search online. Turbo Tax and Tax Act discounts can be connected to your credit card provider, bank, or just a general discount. Be on the lookout at the start of every year for blogs that reveal these discounts.
How do you file your taxes each year?
This has been a guest post by Tim from Kirksville, MO
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