Here’s an overview of 17 tips for making your tax experience this year not only less painful, but more productive, and hopefully, leaving you with more of your own resources to invest in the work that God has given you to do.
1. Liar, Liar – IRS Forms on Fire: Liars Go to Court (and Jail) — Be Honest.
Never give false information or numbers you cannot support with documentation. Thou Shalt Not Lie is good tax advice. And God’s principles for good conduct can keep you out of jail! Story of the IRS receiving an anonymous cash contribution for $1000 with a note, “Here’s a thousand dollars I owe you, If I still can’t sleep at night…I’ll send you the rest.” Honesty allows us to file without fear. If taxes and public speaking are the two biggest fears we have, you can eliminate the fear of the IRS by being honest.
2. Mess messes with your money — Organize today to save money on your taxes tomorrow.
If your tax documents are a mess, you’re probably leaving money on the table. Organize your documents. When you sit down to prepare your taxes, make sure documents like W-2s from employers or 1099s from contract work are all in one place. Also, don’t forget receipts for things like vehicle registration fees, charitable contributions, medical expenses, sales tax receipts and other files documenting things like a move or job search expenses. My wife and I keep our paperwork in a big expanding file folder throughout the entire year. Once it comes to file our return, we are able to easily calculate our income and expenses for all the various categories without wasting time or getting frustrated looking for our documents. It will cost you lost opportunity and time as well as more money if you have disorganized records.
3. Making Your List and Checking it Twice — or Hire someone who can!
Taxes are complicated. US Tax Code is 74, 000 pages…. … At 3,951,104 words long, the U.S. Tax code is seven times the length of Leo Tolstoy’s “War and Peace” – The Code is also twice the length of the King James Bible plus the entire works of Shakespeare combined. Especially if you are a do- it -yourselfer and do your own tax returns…many times we have a question about a grey area…something we may not understand…to be sure get professional advice. Go on-line to IRS.gov and do your research. Use the web or contact a professional. Better to be sure, than to be sorry.
4. Stop Making An interest-free loan to Uncle Sam — Give yourself a raise!
Refunds are a bad idea. Average refund in 2014 was $3034. That is about $250/month that you send to the government every month and celebrate when they send it back to you! Give yourself a raise. Adjust the withholding from your paycheck or if you are self-employed, adjust your quarterly estimated payments to get as close to a zero tax refund as possible.
5. On-Line Shopping isn’t all a computer can do — File On-Line.
Since 1990 taxpayers had the option of filing on-line. It’s Faster, Safer, & Secure. In 2014, about 9 percent of all tax returns were still completed using the paper version. About half of all individual filers do the returns themselves. There are about 15 companies approved by the IRS to provide on-line filing services. A simple 1040 EZ form can be filed on line for free if your AGI – Annual Gross Income in 2014 was $60,000 or less. Check out sites like 1040.com, Turbotax .com, H&R Block, even IRS.gov/freefile.
6. An Apple a Day will not keep the IRS Away – Your health is a tax issue starting now.
You will need to report on your healthcare arrangements to the IRS as one of the consequences of Obamacare, or else: Failure to comply can result in a reduced tax return and penalties.
First, there’s the coverage issue. Under Obamacare’s individual shared responsibility provision, you must let the IRS know when you file that you had the required minimum essential health care coverage or were exempt. If you have qualified coverage through work, you’ll get a Form from your employer or from your insurer. In these cases, you’ll simply check a box on your tax return if you have qualified coverage.
7. For Better for worse; For Richer for Poor; Life Changes will change your healthcare status. So KEEP TRACK.
The Affordable Care Act has a provision called the Premium Tax Credit. This is the government’s way of subsidizing what some folks pay to get their required insurance they obtained through a health care exchange. While some folks got advance payment of this credit when they got coverage, others will claim the tax break when they file their 2014 tax returns.
This credit is impacted by any life events and co go up or down: Among the things that could make a tax credit difference are a birth or adoption, marriage or divorce, moving, job change, and increase or decrease in your household income. Either way, you’ll have some calculations to complete on new Form 8962. That information will be reported on Form 1040 or 1040A. You can’t use the short Form 1040EZ if you get this credit.
8. You Can’t Bluff the IRS. If you claimed you needed a helping hand to pay for healthcare coverage – you better be right.
Form 8962 will be important, because the IRS will look at it to determine if you really deserved to get healthcare at a reduced cost. If you or anyone in your family doesn’t have the required coverage or aren’t exempt, you’ll have to pay a penalty when you file your return. Both exemption claims and penalty calculations are made on new form 8965.
9. Of all the places to cut back on spending, healthcare cuts will only work short term.
Most people without insurance are going to be in trouble — unless you only went without for a short time — ONCE. The penalty amount is also based on the number of months you or your dependents were uninsured. If you’re uninsured for less than three consecutive months, you won’t have to pay a penalty for that time period. This is called a “short gap.” If you have more than one short gap in coverage during the year, your penalty exemption only applies to the first gap.
10. Be wise as a Fox — Beware Tax Scams!
According to Bankrate.com, One of the reasons that the IRS wants to regulate tax preparers is that unscrupulous tax help is a regular in the agency’s annual list of the dirty dozen tax scams. 2014 also saw the explosion of a telephone tax scam, in which con artists pretending to be IRS agents call people and demand money that the crooks claim is due to the U.S. Treasury.
When the IRS issued its first warning in March 2014, the agency called it the largest telephone tax scam ever. Things got worse as the year progressed, with scammers tweaking the calls to continue to trap victims. Tax experts also say they expect taxpayer confusion about claiming or reconciling the health care premium tax credit to spur a new round of scams. So, be on guard in 2015 for new and old illegal attempts to take your identity and tax money.
These scams are so nasty that agents demand money over the phone and threaten legal action or immediate arrest. Remember this, the IRS never makes a demand for immediate payment over the phone. It you receive a call like that, it is not legitimate.
11. Know Thyself AND Make Sure the IRS knows it’s you.
One of the top mistakes taxpayers make when rushing to meet the deadline is gathering incorrect Social Security numbers for their children and spouses. Make sure you have the correct Social Security numbers when you prepare your taxes. Correct Social Security numbers are required to get valuable deductions, credits and exemptions. Slow down, review all your work and ask someone else to double-check it for you.
12. If you’re going long, prepare to catch all your deduction options. Keep Track.
Itemizing your expenses for deductions on your tax form may take more time, but it saves you money. The IRS reports that the majority of taxpayers – about 75 percent – take the standard deduction. Many take the easy way out with the standard deduction, but including a few additional receipts may push you over the standard deduction, lowering your tax liability.
When you file the long form with the IRS, you’re allowed to deduct some things to reduce what you owe. Turbo Tax offers the following helpful tips for maximizing possible deductions for travel, moving and charitable donations:
– Keep a trip log for your volunteer work, job-hunting and doctor’s appointments – those miles add up and represent deductions. Keep Parking, toll and bus or taxi receipts to support your claim, while a record of the miles you drove lets you write off the cost of using your car through the standard mileage rate. Good travel records could help you reach the needed minimum percentage of adjusted gross income for miscellaneous deductions.
– Keep all receipts related to moving … if you have moved for a new job 50 miles or more. Everything from moving, storage and travel expenses related to your relocation may be deducted. You don’t have to itemize to get this tax break to lower your adjusted gross income.
13. Planning for your future can impact your present bottom line.
Maximize your traditional IRA – that stands for Individual Retirement Account to increase your Tax Refund. You have until April 15th to open a traditional IRA for the previous tax year. That gives you the flexibility of claiming the credit on your return, filing early and using your refund to open the account. Traditional IRA contributions reduce your taxable income. You can take advantage of the maximum contribution and, if you’re at least 50 years old, the catch-up provision, to add to your IRA. If you contributed to a Roth IRA, you may be able to claim the retirement savings contribution credit that also lowers taxable income and result in a larger refund check.
14. Sometimes you DO have to spend money to save money!
Maximize your Itemized Deductible Expenses by taking care of some important business. If you can, pay January’s mortgage payment before December 31st and get the added interest for your taxes and complete medical exams in the last quarter of the year to boost your medical expense deduction potential. Paying property taxes by New Year’s Eve could make the difference between itemizing and taking the standard deduction, and thus, a bigger refund. If you’re self-employed, you can pay your fourth-quarter state estimated taxes in December, rather than in January when they’re normally due, to increase your itemizing potential. And when it comes to retirement accounts, such as Roth vs. Traditional IRA; tax-free withdrawals at retirement that could help social security benefits not be taxed as much or at all.
15. DON’T leave money on the table. Keep Track of Your Qualified Tax Credit Options
Credits work better than deductions as refund boosters. For each credit dollar, your taxes go down a dollar. Yet, 20% of eligible Americans don’t claim the earned income tax credit. If you were married filing jointly and earned less than $52,427
If you’re working and meet the guidelines one of which is married, filing jointly and earning less than $52,427, you may be eligible for EITC even if you’re single with no children. If you have kids, the child-care credit may help you.
For those with children in college, credits related to higher education expenses, such as the American Opportunity Tax Credit, could provide tax relief. “The American Opportunity Credit is great because up to $1,000 is refundable. That means you could receive as much as $1,000 even if you had no tax liability
16. Do Not Pass Go – Go Directly to the Bank.
Use the Direct Deposit Option if At All Possible. The IRS reports that about 85 percent of refunds have been direct deposited this tax season. E-file with direct deposit is easy, secure and the fastest way to get your tax refund. Nine out of 10 tax refunds are issued within 21 days or less, compared with six to eight weeks for paper-filed tax returns. I’m not sure if there are any advantages for the 15% who don’t use the direct deposit into their bank account. Maybe they don’t have a bank account.
17. Unless someone is filing a missing persons report on YOU, never miss filling with the IRS.
It’s vital that every year you file your taxes on time or file for an extension. Even if you don’t have the money, you can’t hide from the government forever. And penalties go up for those perceived to be trying to ignore their debt. You can get an extra six months to file your taxes with an extension, but remember that a tax extension is an extension to file and not to pay. You still need to send the IRS at least 90 percent of your tax liability to avoid a penalty. Consider that you may be eligible for an installment payment plan for up to six years. Better a payment plan than a jail cell!
18. The Lord Loves a Cheerful Giver – and the IRS does too!
Giving at least 10 percent to the work of the Lord – tithing — is a commandment in the Old Testament that is carried into the New through the example of the early church. It’s important for people of faith to use their resources to advance the Kingdom of God through organizations and ministries that teach Biblical principles and carry out God-focused work. Interestingly, charitable donations can help increase your refund, though few take advantage of that. Sadly, only 5 percent of Americans tithe while, 50 percent give between Zero and Two percent and 30 percent give nothing at all.
It’s important to keep good records when contributing to organizations or when doing charity work. When you bake for a fund-raiser, for example, the cost of your ingredients can be deducted, but not the value of the time you spent baking. Also, keep all receipts from qualified charities for cash or asset donations that you make. Keep a itemized list of the non-cash donations. You may want to check out Its Deductible, free software to get pricing on the stuff you donate. If you didn’t give in 2014, plan on giving more this year. It’s a tax break that can make an eternal difference in the lives of others.
Chuck Bentley is the CEO of Crown, the largest Christian financial ministry in the world, founded by the late, Larry Burkett. He is an author, host of My MoneyLife, a daily radio feature and a frequent speaker. Follow him on Twitter @chuckbentley For interviews or speaking requests contact email@example.com