If you haven’t already done so, you might need to get cracking on preparing your 2011 Income Tax Return. The IRS wants them mailed in by April 17. To make the task easier, we’ve compiled some suggestions:
THINK: BITE–SIZED CHUNKS
Americans spend 6.1 billion hours a year preparing their taxes. Collectively, that’s almost the same amount of hours that 3 million full–time employees work in a year! To alleviate the anxiety, and ultimately make the process less daunting, get started today — a process that begins with organizing your paperwork/establishing a filing system, reviewing all your documents, and ends with an e–file. Simple as that, and only requires a few designated hours a day.
MAKE CONTRIBUTIONS TO YOUR IRA
One of the best ways to save for retirement – and reduce your tax liability — is with an IRA. The maximum contribution limits for 2011 are $5000 for those under age 50; $6000 for those age 50 and over. In most cases, you have until April 17th to make these contributions (even if you’re planning on filing for an extension).
MAKE SURE YOU CLAIM ALL THE BREAKS YOU’RE ENTITLED TO
Every year, Americans leave “free money” on the table and fail to claim credits (which reduce your taxes dollar and dollar) and deductions (which lowers the amount of your income that is subject to tax). Among the more common missed breaks: education credits, earned income tax credit, childcare credit, mortgage interest deduction, student loan deduction, job hunting expenses and out of pocket charitable contributions, such as miles to and from your philanthropic endeavors (14 cents/mile plus parking and tolls).
As many as 99 million taxpayers e–file. It’s the easiest, most convenient way to file your taxes and leads to fewer errors (just 1% versus 20% for paper returns)! You also get your refund in a matter of days — less than seven days (if you use direct deposit) versus up to six weeks if you file a paper return.
ADJUST YOUR WITHHOLDING
File early and you’ll likely see that you’re having too much withheld from your paycheck. After all, two out of three taxpayers got a refund last year and the average refund was nearly $3000. It’s better to get this money – about $250 a month! – as you earn it rather than give the government an interest–free loan.