MONEY MANAGEMENTFrom the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®
NO SWEAT TAX FILING TIPS(March 1, 2006) — Many taxpayers find themselves facing unnecessary stress about filing their tax returns. By following a few “no sweat” tax-filing tips, the Virginia Society of CPAs says you can get through the process without too much anxiety.
Do your research
Tax laws are always changing. Be sure you are aware of the many tax law changes
that have gone into effect in recent years. Don’t wait until the last
learn the laws that are most relevant to your situation.
You will save time if you’re prepared and organized. Make sure you have gathered all the documents you need. For example, you may need W-2 form(s) from your employer(s), 1099 forms showing how much interest or dividends you earned, and Form 1098 for reporting the amount of mortgage interest and real estate taxes you paid. If you plan to itemize, you’ll also need to locate records of charitable contributions and receipts for unreimbursed business, medical and other deductible expenses.
Don't shortchange yourself
Don’t rush through your taxes so quickly that you overlook deductions
or credits for which you are eligible. And bear in mind that there are many
available to you even if you don’t itemize. Examples include individual retirement accounts (IRA), student loan interest, moving expenses, alimony, one-half of
self-employment taxes and certain tuition expenses. Make a running list of tax breaks that you think you may be entitled to claim and review this with your CPA.
Compare with last year
Take time to review last year’s return. A side-by-side comparison is a good way to be sure you’re not missing any deductions. It can also point out any irregularities between the two returns.
Check your math
Be sure to double-check your math. The Internal Revenue Service (IRS) reports that addition and subtraction mistakes are among the most common errors on tax returns.
Review your return
Start by checking to see that you have provided the correct Social Security Number for you, your spouse and any dependents. Be sure to include your W-2s, and any extra tax forms and schedules your return requires. Remember, you and your spouse must both sign a joint return, even if only one of you is reporting income.
There are several benefits to e-filing. When your return is filed electronically,
the IRS computers automatically check for missing information and errors. After
checking, the IRS sends you an electronic confirmation, telling you whether your return is accepted or rejected because of a mistake. With e-filing, if you are
entitled to a refund, you will receive it much quicker, especially if you select the direct deposit option — possibly within 10 days as compared to six to eight
weeks for a paper return.
Get an extension
If you find you can’t meet the April 17, 2006 deadline for filing your 2005 return, you can get an automatic six-month extension by completing Form 4868 and sending it to the IRS on or before the filing date. Just remember that what you are getting is an extension for filing — not for paying any taxes due. You still must pay your estimated tax balance by the April 17 deadline. Be diligent in estimating your tax liability, you may owe penalties and interest if you underpay.
Hire a CPA
This might be a good year to consult with a tax professional to be sure that
you are taking advantage of every opportunity to save on your tax bill. When
a CPA, you get the benefit of someone who is up to date on IRS tax law changes and on the wide range of tax benefits that pertain to your situation.
It’s not too early to start planning now for 2006. Once the 2005 filing
season is over, make an appointment with your CPA to discuss tax-saving strategies
for next year.
The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at www.vscpa.com.
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