Consider these tips to make tax time easier
|
||
|
||
Depending on whom you ask, February brings thoughts of Chinese New Year, spring, opera, Valentine's Day and tax preparation.
The Internal Revenue Service officially kicks off tax season in Honolulu with some special Saturday hours next week as well as tips and reminders to help taxpayers get through the season more smoothly.
This year, the federal agency is trying to encourage more people to file electronically. Officials say the free system offers the assistance and accuracy that has been associated with purchased products such as TurboTax.
IRS spokesman David Tucker said the error rate for tax returns filed on paper is 21 percent, while that drops to less than 1 percent for those filed electronically.
"The e-filing provides improved accuracy," Tucker said. "The software will do your calculations for you," which sounds especially appealing for the math-challenged among us.
Taxpayers seeking free options to prepare and e-file their federal tax returns can use IRS Free File. Explore Free File simply by going to the www.irs.gov homepage or www.irs.gov/freefile to access the free options.
The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service and the Free File Alliance LLC, a group of approximately 20 private-sector tax software companies.
Free File comes in two formats: Traditional Free File, which is available to taxpayers whose income in 2009 was $57,000 or less, and Free File Fillable Forms, which is available to almost all taxpayers.
The IRS said 70 percent of taxpayers, or 98 million people, are eligible for Traditional Free File. It provides step-by-step software help that asks simple questions and puts the answers on the correct tax forms.
And Tucker said that can help taxpayers become aware of new tax credits available this year.
For taxpayers who are comfortable preparing their own returns, there's Free File Fillable Forms. Almost everyone is eligible for this service. There are no income limits, and almost all tax forms are available. This service provides electronic versions of IRS paper forms. Taxpayers can complete the tax forms online and file electronically.
Even those taxpayers who are not eligible to e-file, such as people claiming the first-time homebuyer credit, can still use Free File to prepare their tax return, he said.
The electronic file also will identify credits that you may be eligible for that you didn't even know about, he said.
For example, taxpayers who file a new Schedule M and apply for Making Work Pay and Government Retiree Credits.
The Making Work Pay credit is designed to help millions of workers and self-employed individuals, while the government retiree credit especially targets former government workers who aren't receiving Social Security benefits.
The IRS says income limits apply to the Making Work Pay credit but not to the government retiree credit. Both credits are refundable — meaning that those eligible can get them even if they owe no tax.
Most eligible taxpayers qualify for the maximum Making Work Pay credit of $800 for a married couple filing a joint return or $400 for other taxpayers.
Tucker also said that people who e-file get their refunds sooner. And this year for the first time, he said, people also can opt to have their refund as a savings bond.
"E-file will ask them how they want their refund," he said, allowing people to send the money to a single bank account or more than one or to buy savings bonds.
Tucker said the bonds option started last month.
For personal records, Tucker recommends printing out a copy of the returns that are filed by computer.
Tucker also points to the earned income tax credit as another area where taxpayers can get money back if they know what to file.
"There are many tax credits and deductions that may help individuals struggling in tough economic times to save money on their taxes this year," Tucker said.
"Many people will qualify for EITC for the first time because their incomes declined, their marital status changed or because of credit expansions to help people as part of the American Recovery and Reinvestment Act of 2009. Under the act, taxpayers with three or more children get an extra boost with a larger credit this year," he said.
Tucker also reminds taxpayers that people who give to charities providing earthquake relief in Haiti can claim these donations on the 2009 tax return they are completing this season.
Taxpayers who itemize deductions on their 2009 return qualify for this special tax-relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.
Just think, April 15 is weeks away. So, there is time to get more organized, even for procrastinators.