Filing your annual income tax returns may seem like a relatively straightforward process, and it largely is. However, there are a few tips and tricks, or secrets, that an average taxpayer may rarely explore. Careful consideration of these strategies can net you a larger refund and help you avoid unnecessary stress when dealing with the IRS.
Late for a Tax Filing Date?
For most calendar years, income tax returns for the previous year must be filed by April 15. However, some years, this date falls on a Sunday and the filing day is pushed back to the next business day. If you cannot file your tax return and remit taxes due by the filing deadline, the IRS offers taxpayers to request a filing date extension with Form 4868, the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. If you are prepared to file your return but can't pay the tax bill, you may use the IRS website to file a request for a payment agreement.
Extra Time for IRA Contributions
If you have an individual retirement account, or IRA, set up at the end of the tax filing year, you retain the ability to make tax-free contributions up until the standard or extended tax filing deadline. When you are faced with a slightly larger tax bill than expected, maximizing your contribution to an existing IRA can help reduce the tax you owe by reducing your adjusted gross income.
Some tax filing years feature additional tax credits that may last for one to several tax years. In the past these have included a variety of taxable income deductions and refundable credits that reduce taxes owed and result in a sizeable refund. Major examples of credits have included the first-time home buyer tax credit and credits offered to victims of hurricanes and other natural disasters. If you see a potential credit that you are not familiar with on Form 1040, U.S. Individual Income Tax Return, review the instruction booklet for the form to determine if you are eligible to claim the deduction.
If the various types of taxable income, deductions and credits on your tax return make your head swim, you can also opt to receive a bit of tax filing help. Free IRS approved tax filing help is offered for individuals with lower income, while earners who don't qualify for free filing can opt to employ a tax professional or use tax preparation software. A major perk associated with seeking tax help is the ability to deduct the cost of that help on your income tax return for the following year. For example, the fees paid to prepare a 2011 tax return are paid in 2012. The expense is a deduction on the 2012 tax return.
Errors Are Not Fatal
If you do make an error on your income tax return and receive a notice from the IRS, remain calm. Tax mistakes are not fatal. IRS notices and communications generally relay the nature of your mistake and request additional information to support your original claim or correct your error, and note the reduction in your refund amount or request additional tax funds.