The Top Do's and Don'ts for Tax Time

Last week, the IRS issued a press release that the delayed returns, any returns including Schedule A (itemized deductions), the educator expense deduction or the tuition & fees deduction – will begin to be processed on Feb. 14 – Happy Valentines Day! This is good news because taxpayers didn’t know when their returns might be processed and rumor had it as late as the end of February. The delay followed the Dec 17 enactment of The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which extended a number of expiring provisions. So you can file now and the sooner you file, the sooner you will get that tax refund back, especially if you e-file and select direct deposit. I’ve been doing a lot of research on taxes this year and my best tips are listed below, courtesy ofhttp://www.TaxACT.com TaxACT Free Federal Edition, a free filing solution that quick, easy, and available to everyone.


DO:



• Do Get Organized Ahead of Time – I recommend my “Sixty Minute Tax Workout” where you whittle down the tax task a bit at a time. Get organized before you sit down by gathering all your W-2s, 1099s, and other tax documents.


• Do Get Smart – Familiarize yourself with the new tax law changes by going to IRS.gov and look at Publication 17, the first few pages summarize the major changes. You can also go to taxact.com/taxinfo.


• Do Ask Questions – It’s smart to ask for help when you don’t understand something about your return. Use the Answer Center in TaxACT, type in your question and get fast answers. Or, email your question for free.


• Do E-file – For the fastest refund (in as few as 8 days with direct deposit). Unlike paper filers, e-filers get an e-mail when the IRS has processed your return.


• Do Get it Free – Use a free tax preparation solution. I recommend TaxACT Free Federal Edition. You can print, prepare and e-file simple complex return absolutely free. TaxACT will guide you step by step through your return and all the tax law changes. Includes free tax help via e-mail. Even if your return won’t be processed by the IRS until February 14th, there’s no reason to wait. You can prepare and e-file with TaxACT now, and they will let you know when the IRS has processed your return.


• Do Pay What You Can – If you cannot pay your tax balance, then file and pay as much as you can by the April 18th deadline to avoid penalties and interest. Call the IRS to discuss payment options, including installments.


DON’T:


• Don’t Forget to Import – Save time and aggravation by importing key data from a PDF copy of last year’s return. If you have multiple W-2s, a 1099 or investment data, use the quick entry features available on TaxACT Free Federal Edition at taxact.com.

• Don’t Procrastinate – Although this year’s filing date is April 18, 2011, don’t procrastinate because rushing can = errors.

• Don’t Get a Cash Advance On Your Refund – When you can get your refund in as little as 8 days by e-filing and selecting direct deposit, it’s a dumb money move to pay all kinds of interest to get your cash a few days earlier. You need that extra money, don’t throw it away!

• Don’t pay more than $15 to e-file State Taxes – If your state charges income tax, then all your federal info transfer to your state when you use an online solution such as TaxACT. The federal solution is free and the state solution costs less than $15.

• Don’t Use A SmartPhone Application – TurboTax released a smartphone application for 1040EZ returns. When it comes to taxes, it’s not about saving time as much as it is about ensuring accuracy and getting the largest refund you possibly can. Spending the extra few minutes could mean a bigger refund or less taxes owed.

• Don’t Spend your Refund on Disneyland or a new iPad – Instead, use 50% of the refund to pay down credit card debt and the other 50% to build up your emergency fund. You may not get the mouse ears this year, but you’ll be in better financial shape!

Ellie Kay

America's Family Financial Expert (R)