With tax season right around the corner, many taxpayers are contacting their tax professionals and gathering all their pertinent documents to ensure a smooth and painless process of filing their taxes. There are some taxpayers who choose to file their income taxes on their own, and there is certainly nothing wrong with that. It is important, however, to make sure that you are covering all the bases when you decide to file without the financial expertise of a tax professional. Here is a look at five rules you should follow if you are filing your 2012 tax return yourself.
Determine If You Have a Simple or Complex Return
Prior to filing your taxes, you should determine how complex your tax return might be. If you are filing a simple return with no deductions other than the standard one, filing by yourself should be a fairly simply task. However, if you are married, filing with multiple W2s or have various deductions, it may be wise to consult a tax professional for assistance. A tax professional will be able to maximize your return and ensure that you are not missing any vital information. His or her guidance can also help protect you in the event of an audit.
Understand the Tax Code
Before you start filling out that 1040 form, make sure that you have at least a basic knowledge of the tax code and its terminology. This is one form that you definitely do not want to second guess. Keep in mind that the tax code changes year after year, and filing a return using outdated knowledge may have dire financial implications in the future. The tax code is highly complex and easily misunderstood.
If you are ever in doubt, contact a tax professional or reference the tax code at www.irs.gov.
Keep Organized Records
A crucial part of filing taxes is maintaining accurate and organized tax records. Tax forms, receipts and other important documentation should be filed away for at least seven years in case of an audit. If you plan on claiming a deduction, make sure you have the receipt on file. When filing your own taxes, it is vital that you keep organized records and keep them filed in a safe place.
Don't Be Afraid to Ask Questions
Just because you are not using an accountant to file your taxes doesn't mean that you have no resources available to you should a question arise. There are plenty of resources you can consult if you have a question about the tax code, filing forms, eligible deductions and more. Some of these resources include the IRS tax hotline, various retail and traditional tax professionals, and online resources. Don't be afraid to ask questions prior to filing; it could save you a lot of time and money in the future.
Know What Tax Credits You Are Eligible For
In order to maximize your refund, you will need to know what tax credits you are eligible for. This is where having a solid understanding of the tax code comes in handy. Families with children are eligible for a number of tax credits, especially if they have a child in college or in daycare. Every year, the IRS reports lists of commonly overlooked tax deductions and credits. Some of these deductions include job-hunting costs, reinvested dividends and out-of-pocket charitable contributions. Plan ahead and make sure you are getting all the deductions and tax credits you deserve.
The Bottom Line
You can successfully file your own taxes when you do your homework. Having a good knowledge of the U.S. tax code, staying up-to-date with recent tax changes and knowing what deductions and tax credits you are eligible to receive are all effective ways to ensure tax filing success.