Smart TaxesSmart Taxes

5 tips to save money on taxes

Follow the rules, take advantage of free help, organize your records and know when you need a pro.

By Teresa Mears Apr 11, 2011 7:08AM

We all want to save money on taxes, but the government insists we pay our fair share. Still, big corporations aren't the only ones entitled to tax breaks.

 

Just following the rules can save you money, as can using the right tools. When we think of saving money on taxes, we think about little-known deductions, but for most of us the real savings are in the basics.

 

Here are five tips to save money on taxes:

  • File on time. Even if you can't pay all your taxes, you should file a return or an extension to avoid the penalty for not filing on time. Death, by the way, is not an excuse for missing the deadline. As executor of an estate, I filed two years of tax returns for a deceased relative. Because I filed those returns after the deadline, the deceased (actually her estate) was assessed a penalty.
  • Take advantage of free online filing options. Yes, you can buy tax software, and if you have a complicated return, you may need it. But if you made less than $58,000 last year, you can use Free File,  a partnership between the IRS and vendors of tax software. Each company has slightly different rules. If you made more, you can use free IRS online forms.
  • Get free in-person help. Organizations from AARP to the IRS provide free help to taxpayers at sites around the nation. If you made less than $49,000 last year or you're over 60, volunteers will prepare your tax returns for free, so why pay someone to do it?
  • Find a good accountant. If you have a complicated tax return, paying an accountant or enrolled agent may save you more in taxes than you pay in fees. Just because you can do your own taxes doesn't mean that you should. Hiring a tax pro could save you not only time and money, but your sanity and your marriage. Not all tax preparers are equal and fees vary, so be sure to check out any pro you consider.
  • Keep good records. The tax code provides all kinds of deductions, from business mileage to energy tax credits. But you can't deduct mileage you've forgotten. That's why it's important to set up a system for the records you use to prepare your taxes. Consider a mileage log in your car, an online or computer accounting program or an old-fashioned envelope system. How you keep the records doesn't matter. What matters is that you have all the information when it's time to do your taxes. 

How do you save money on taxes? We want to hear from you on Twitter!

 

Share your tax tip with us on Twitter on Monday, April 11, to enter for a chance to win a $100 American Express gift card in our MSN Money Money Tips Twitter Sweepstakes. To participate, you must follow us on Twitter (sign in or sign up and then click this link: http://on-msn.com/hDe4Ke), @reply to us with your answer to our tax question and include the #MSNMoneyTips hashtag in your tweet.

 

One winner for this tax question will be selected randomly and announced on the MSN Money Twitter page during the week of Monday, April 18. We'll collect the best tips and may include them in an upcoming Money feature. Good luck!

 

For more information about the weeklong sweepstakes, please visit http://on-msn.com/ifn2Cn.

 

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2Comments
Nov 17, 2012 5:03PM
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None of these tips lower your tax bill. Ideas such as maxing out tax shielded investments, using tax-advantaged investments, etc, would save you money on taxes.
Apr 11, 2011 1:07PM
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Hey Teresa, great article. There are some excellent software tools around to help you maximise your taxes too. Readers might might find 1DayLater useful <a href="http://1daylater.com">1DayLater Mileage logger</a> It's a free tool, which makes it easy to track mileage and other daily expenses. Hope that's useful! Oh and the tip about having a good accountant is spot on - make sure you get an accountant who speaks your language and who will take the time to educate you
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