In today’s economy, everyone is looking to save money on their groceries, car insurance, monthly rent expenses, and more. Luckily, this can work for tax time too. Below, we’ve outlined some of the top ways you can save money as April 15 nears, including:
9 ways to get prepared for your tax appointment
10 ways to save money on your tax return
5 benefits of using a tax professional
9 Ways to Get Prepared for Your Tax Appointment
Some of these so-called “organization” tips may seem like common sense, but the truth is, not being prepared for tax time can cost you quite a bit of money. If you have an accountant do your taxes and throw a shoebox full of receipts at them, it’s likely they will charge you the extra time required to get it organized — especially if it’s something you could’ve done yourself. Make your accountant happy and get organized before you go to your appointment:
- Organize expenses and income - Get together all 1099s and business receipts from the previous calendar year. Organize them by category in an expandable file folder. Or, if you use an accounting program, do the same with your software.
- Do part of the work at home - Even if you plan to meet with a tax pro, consider utilizing one of the many available free tax software tools to do a bit of up-front work. The software takes the guesswork out of deductions by allowing you to search for possible deductions you may qualify for.
- Bring in an organizer - If your tax preparer mailed you an organizer, be sure to fill it out prior to your appointment. Even if you don’t have a lot of information to include, it helps to have at least something for them to look at.
- Research your charitable deductions -Find out the tax status of your charitable deductions by visiting www.irs.gov/app/pub-78/
- Find your investment’s cost basis - If you sold investments last calendar year, it’s important you know your cost basis (the purchase price + sales commissions and fees, adjusted by reinvented dividends and stock splits). Not knowing may make you pay more in capital gains tax.
- Record of non-cash contributions - If you made non-cash contributions to items over $500 (ex. A car or electronics), provide your accountant with that information.
- Find year-end statements:
- Brokerage accounts - Year-end statements for any brokerage accounts you have (1099-DIV, 1099-INT and 1099-B) are useful when filing.
- Profit and loss statements - These are easy to pull if you use accounting software. If not, be sure to enter the expense items in the business page of the tax organizer your accountant sent you.
- 1098s - You should have received these if you paid mortgage interest on a loan secured by real estate used as a rental property or residence.
10 Ways to Save money on Tax Preparation
We’re not talking deductions and tax credits. Instead, there are many ways to save money when preparing your taxes, from online programs to coupons and business discounts. Here are a few of the best ways to save some dough when filing:
- Tax software companies - If you’re financially savvy, tax preparation software may be for you. Many can be used for a fraction of the cost of an accountant, but you run the risk of missing important deductions and credits. IRS.gov lists more than 20 FREE software companies that may be useful if you earn less than $58,000.
- Financial institution discount - Many banks and credit unions offer preparation services or software discounts to their customers.
- Check coupons and coupon codes - Search sites like CouponCabin.com or CouponWinner.com before purchasing tax software. You may also be able to find coupons for preparing services. However, many of these expire before April, so be sure to plan ahead.
- Group discounts - Many times, preparers and software will give discounts for multiple family members using the service.
- Referral offers - Some preparers will offer a discount when you refer multiple friends or family members.
- Avoid the rush - Many tax preparers offer discounts for those who file earlier in the season, as well as after April 15. Keep in mind, though, you’ll need to file an extension if you choose the latter option.
- Combination packages - Some tax preparers are offering a combination plan where you can do your taxes online, then bring it into the office to have it checked by a professional. On average, this can save you $75-$100.
- Social networking - Many businesses have begun using social networking to promote their services and offer special deals. For example, a small accounting firm on the east coast is using LinkedIn and Facebook to advertise deals.
- Unemployment package - Many businesses are offering a discount rate if you or your spouse lost a job during 2010.
- Senior discount - If you’re a senior, be aware of the discounted or sometimes free tax preparation services. The same goes for low- to middle-income families.
5 Benefits of Using a Tax Professional
If you’re self-employed, own your own business, or have more to consider than a salaried job and rent, using a tax professional instead of online software could work to your benefit.
The IRS reported about 60 percent of Americans use a tax preparer to help with their yearly tax filing. Why? Because according to many surveyed, tax professionals are better able to offer insight into possible credits or deductions you’re missing, unlike most tax software.
Here are some of the most common benefits:
- Proper guidance - Tax professionals are able to provide guidance with unfamiliar terms and forms you may come across while filing. The Unincorporated Business Tax Return? The Small Business Act? Tax professionals can explain all of it.
- They can point out missed deductions - Perhaps you’re not including clothing donations as a deduction? Or, maybe you forgot about those miscellaneous advertising costs? A professional can help ensure you’ve included all of these in your return.
- They can recommend adjustments - Trained tax preparers can recommend adjustments to home offices or shared workspaces that software programs may not.
- Overall “big picture” recommendations - Tax professionals will look at your income, expenses, and situation, and can recommend ways for you to save money in the future.
- Audit assistance - In the unlikely event you get audited, an accountant can help prepare you for an audit, and can even be present during the audit.
Consider all of the above guidelines when filing your taxes this year – they’ll help save you time and stress in the long run.
About the Author:
Pam King empowers personal finance geeks to save money on their tax preparation costs through research, education and careful decision making.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.