Save Money on Your Taxes

Everyone dreads doing their taxes, even if they are expecting a refund. Why? Because you have to make sure every income is recorded and if you miss something you could end up paying in the long run. So what to do? Do your taxes before April 15. If you don't you will get hit with a late fee if the IRS finds that you owed them money. The best way to avoid this fee is to file your taxes on time every year even if you know that you will not be receiving a refund. You may end up one year actually getting a refund and if you owe taxes this money could be put to pay for it and save you money. They will only forgive late returns if there were unforseen circumstances.

Inspect your paychecks and W-2 forms for accuracy, such as the number of exemptions or dependents being claimed. Some places use 99 exemptions or dependents as a default and if this is your first job you may not even realize it is there until you file your return. Having this as the number of exceptions or dependents is like saying that you have ninety nine people that you support and live with you. You may not get charged for this mistake but do you really want to find out when you are filing your return?

Show all income received whether it was ten dollars or a hundred dollars. This means all interest payments, retirement payments, tips, and any other income not considered wages from work through an employer.. If you receive a 1099 that only tells you that it is for your records only, you do not have to include in your return. Also try to avoid withdrawing from your 401k plan unless you absolutely have to because every time that you withdraw before you are 59 and a half, the IRS will take almost 20% right away and will tax you again at the end of the year. So you could end with almost 40% in penalty fees alone.

Another good thing to do is to claim the Earned Income Credit. This credit is for low income families and are given every year when you do your taxes. Even single individuals can qualify if they meet certain criteria. If you make too much to claim the EIC, you can always itemize your deductions. This means though that you must save every receipt you get throughout the year, and even certain casino losses can be claimed as well. The downside to this is that you will have a year's worth of receipts, so a big file cabinet, bag, or trunk will be your best place to keep it.