What to know before filing your income taxes
By Tom Musbach
Posted in: General
Before you can file your 2012 income taxes, you usually have to gather important documents, review relevant tax rules, and make a few decisions.
The process is complicated, but the tips below can help make it easier, not to mention save you time and money.
Deductions that help you save this year
The recent American Taxpayer Relief Act of 2012 extended several tax breaks for individuals. Shane Northrop, a tax Expert on JustAnswer, noted these particular ways to save:
- The optional deduction for state and local sales taxes instead of deducting state and local income taxes.
- The above-the-line deduction for up to $4,000 for qualified tuition and related expenses.
- The deduction for mortgage insurance premiums.
- The above-the-line deduction for up to $250 for classroom supplies purchased by teachers.
- The exclusion from income for cancellation of mortgage debt of up to $2 million on a principal residence.
Common errors to avoid in preparing taxes
Every year, common mistakes trip up taxpayers. These can be costly in both time and money, and sometimes may trigger an audit. As noted on the IRS website and CBS Moneywatch, these easy-to-avoid errors include:
- Incorrect or missing Social Security numbers. Always double-check this.
- Forgetting to file a change of address. You must notify the IRS that you have moved; use Form 8822.
- Withholding and estimated tax payments that were entered on the wrong line.
- Forgetting to keep receipts of charitable deductions.
- Failing to deduct state taxes. This is easy to forget on your federal tax return, but it can save you money.
Consider hiring a tax pro
In a recent interview with NerdWallet, John-Paul Valdez, a finance Expert on JustAnswer, highlighted the benefits of hiring a pro to do your taxes.
"Over the past 3-5 years, tax laws have changed dramatically. By hiring a tax Expert, you can save time, prevent headaches and confusion and be prepared in the event of an audit," he said.
"Tax software you can buy at an office supply store is great, but it may not catch all of your deductions," Valdez continued.
"Hiring someone to do your taxes is actually very affordable, often around $200-400 -- I call it one of my most recommended investments."
Got a question about your taxes? You can always ask a tax Expert anytime on JustAnswer.