Updated: 12/18/2012 4:45 PM ET|
Your 15-point tax-return checklist
10. Get credit. A tax credit is the best expense to have. It's a dollar-for-dollar reduction in your taxes. A deduction reduces your tax by your marginal rate. For example, at a 25% rate, a $100 deduction reduces your tax by $25. A credit would reduce your tax by the full $100. Review the potential credits you may be eligible to claim. If you have children, you may qualify for the child tax credit or the child and dependent care credits. Did you adopt? There's an adoption credit. With or without children, you may qualify for education credits and a credit for foreign taxes paid (check your 1099Bs). Don't forget the credit you get for estimated taxes paid, withholding and, if you worked for two or more employers, excess Social Security withheld. Remember the credits for energy improvements and education.
11. Get cash. Decide how you're going to file. That's going to affect how quickly you're going to get that refund. If you e-file, and make the IRS happy, you're going to get your money back faster. Alternatively, if you file on paper, direct depositing your refund eliminates mail delay and speeds your access to cash. It also eliminates checks lost in the mail. The only reason I can see for not choosing direct deposit with a paper filing is if you just don't have a bank account.
12. Get filed. None of this matters if you don't actually get your return to the IRS. If you owe money, interest and penalties accrue for not filing, in addition to interest and penalties for not paying. You've done the hard work, now get it off your desk! Or file for an extension with Form 4868.
13. Get receipts. If you filed on paper, get a receipt. I always mail my IRS correspondence certified, return receipt requested. If the IRS doesn't get your return, it wasn't filed. It may have been lost in the mail or lost by the IRS itself. But unless you can prove that it was filed, if the IRS doesn't have it, legally it wasn't filed. Prudence today can avoid disaster tomorrow.
14. Get planning. It's not too early to start your planning for the 2013 tax year. You can check out tax brackets, standard deductions and exemptions for 2013. Once tax season is over, your financial adviser is going to have the time to review your wealth accumulation strategies. Don't put it off. People don't plan to fail; they merely fail to plan.
And finally . . .
15. Get real. It's only your taxes -- not life or death! Do your best, but don't obsess. Even the IRS understands that only those with tombstones over their heads never make mistakes. Remember, it's the new, friendly IRS. But it will charge interest and penalties.
Jeff Schnepper is the author of the best-selling book "How to Pay Zero Taxes," which is in its 30th edition. He is a former professor of taxation, accounting and finance. Schnepper now has a full-time tax planning and legal practice in Cherry Hill, N.J. Click here to find Schnepper's most recent articles.
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The current federal income tax system is clearly broken -- unfair, overly complex, and almost impossible for most Americans to understand. But there is a reasonable, bipartisan alternative that is both fair and easy to understand. A system that allows you to keep your whole paycheck and only pay taxes on what you spend.
The FairTax is a national sales tax that treats every person equally and allows American businesses to thrive, while generating the same tax revenue as the current four-million-word-plus word tax code. Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to . The FairTax rate after necessities is 23% and equal to the lowest current income tax bracket (15%) combined with employee payroll taxes (7.65%), both of which will be eliminated.www.fairtax.org
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