It's the time of year that makes even the most organized people cringe – tax time. Unless you are an accountant who knows all the ins and outs of taxes, this time of year can be confusing. But a combination of getting things done early and finding some hidden money might make the process a little less troublesome!
Be on Time
Really, filing on time is one of the most important things you can do at tax time (well, that and being accurate!). You don't want to have the hassle of filing for an extension and then feeling forever behind the eight ball. And if something looks wrong, you have time to fix it without a looming deadline. Set aside blocks of time to make it easier – one block for gathering your papers, one for a first run at it, a dedicated time for focused proofreading, and then the final organizing before it gets filed or sent. Even if you have someone else do it for you, you still have to take the time to gather all the papers and records you need. The earlier you get that done, the better.
Find the Money
If you have dependents like children at home or even an elderly parent you care for, you might be entitled to take advantage of the child and dependent tax credit. The credit can amount to thousands of dollars of tax savings. The credit includes traditional day care and childcare, but also can even cover summer day camps as long as it is something that is caring for your kids to give you time to work. If your employer offers a flexible spending account and you are signed up, you can also use that to get a tax credit if you used it to pay for the care or expenses of a dependent.
Charity credits can raise a red flag with the IRS, but if you keep meticulous records, you shouldn't have a problem if you are ever audited. You can deduct expenses for things like donations you make to the Salvation Army or other legitimate charitable organizations. So you think that 5-year-old blazer isn't worth mentioning? If you donate a large pile of good-quality clothes, a few bags of kids' books and toys, and various household goods throughout the year, your donations could easily add up to hundreds of dollars in charitable deductions you can claim. To make sure you are covered, keep very specific records. List every item you donated, take a photo of what you donated, and don't forget to get a receipt (you have to have this). Attach all your photos and documents and keep them in a file marked “donations.”
Make Sure Everything Is Legal
If you employ a housekeeper, gardener, or even a sitter and pay him or her $1900 or more in a year, you are most likely, in the eyes of the IRS, a household employer. If so, you need to be paying the taxes of your employee and if you haven't done that yet, it's not too late to get going. You should probably consult with an accountant familiar with both tax and labor laws to make sure it is all done by the book. If you choose not to, you are taking a risk that carries hefty fines and penalties.
When you are ready, file your return and give yourself a pat on the back for another (big) chore completed.