Avoiding The Tax Pinch, and Getting Electronic Assistance
It happens every year, and now it is happening again. It is tax time. Whether you are an employee on a W2 status, or self-employed on 1099′s, or both, or neither, if you have received any income in the United States, you are required by law to report it on a federal tax return.
For some folks who have only W2 income and basic deductions, a simple Form 1040 will do the trick. But for anyone who has self-employment income, expenses for higher education or mortgage expense or casualty loss, or income from investments of the sale of an asset, or any of 1,000 other types of income or expenses or events, then the simplicity of the 1040 disappears. Other forms are needed.
The more complexities of your financial life, the more complicated your tax return. Years ago, I hired a CPA every year to prepare my personal and corporate tax returns. Having one was essential. In fact, one year his $500 fee resulted in my obtaining a $6,000 refund that I would have otherwise unknowingly forfeited, simply because I did not know about my tax rights for deducting per diem allowances while working as a consultant in another state for a period of less than 6 months while maintaining my primary residency in my home state.
But now my financial situation is much simpler. No trading of investments as I work to pay off all my debt. No traveling for my work and very few work-related expenses. And only basic charitable contributions. So, in years like this, I simply do my own taxes. Personally, I use TurboTax. Last year I used TurboTax Online and loved it. The Home and Business Edition was necessary to do some basic business-related deductions. Filing electronically, my refund was posted to my checking account in about 14 days. And that sure is a lot better than the “good ol’ days”!
Many times I am running late on getting my stuff together to begin filing. So, I simply file an application for an automatic 6 month extension: IRS form 4868. With some major events in my life, it actually took me two years to file my 2005 taxes. I owed no penalties or interest because I had prepaid that years taxes by applying funds from my 2004 return. But be advised that if you owe taxes when you file your extension, you should pay whatever you think you owe, or you will be presented a bill for penalties and interest.
TurboTax is especially helpful if you use Quicken throughout the year. You can automatically [easily] track income and expenses to your designated categories throughout the year; and you can set it up to download your transactions from your bank or credit card so that you can minimize manual input. Then at tax time you simply import your transactions into TurboTax.
Wishing you more time with friends and family, and less time doing taxes!
Michael
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
I did it! I got my taxes filed last night just before midnight. Now I am waiting for my email from TurboTax to inform me that the IRS has accepted my return. Then I mail in my signed paper to authorize its processing. If all goes well, I should have my refund autodeposited to my account within two weeks.
This year I am keeping my Quicken up to date so as to be able to easily import my expenses into TurboTax next year, thereby saving lots of time and effort in having to gather and input my information.