Tax Tips

  • Disclaimer: The content of this page is intended for general informational purposes only and is not a substitute for professional financial advice.
  • TAX DUE DATE: APRIL 15, 2008


Tips for Doing Your Taxes

(Screenshot by Mahalo)
(Screenshot by Mahalo)
  • Understand the basic premise behind your tax return. Don't be intimidated by the idea of doing your taxes. You are essentially accounting for how much money you made in a year and subtracting any allowable deductions from that amount. The tax you owe is based on the resultant number. If you already had taxes withheld from your paycheck, you may not owe the government anything at all. They may owe you.
  • File electronically. Even the IRS thinks you should. Filing electronically increases the accuracy and efficiency of your return. Your state and federal returns will be filed simultaneously, and online services like TurboTax will walk you through the whole process in plain English.
  • Organize your tax records before you begin. Before you sit down with an accountant, sign-up for TurboTax or put pencil to paper, you should pull together all the documents you're going to need to fill out your return.

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  • Use the IRS website to figure out your filing status and which forms you're going to need. Despite their reputation for being needlessly bureaucratic and confusing, the IRS maintains an especially useful website. The site can help you figure out your filing status and download every form you might possibly need.
  • Account for all of your income. You've added up your W-2s and 1099s, but don't forget tips, gambling winnings, jury duty pay, alimony received, fellowships and all the other different forms of income that must be accounted for on your tax return. See Tax Topic 400: Types of Income for additional information.
  • Don't forget the most common tax credits. A tax credit is an adjustment you're allowed to make to your gross income whether you're itemizing your deductions or not. The most common tax credits include those for taking care of children under the age of 17, adopting a child and making energy savings to your home.
  • Figure out whether you should itemize. The IRS lets everyone take a "standard" deduction from their yearly income to arrive at their "taxable income." Your tax is calculated on the basis of your "taxable income" so it stands to reason that you want to take as large a deduction as possible so that your "taxable income" and resultant "tax" is a smaller, rather than larger, figure. Sometimes, itemizing your deductions will allow you to subtract a larger amount from your yearly income than just taking the standard deduction would. What can you write-off as an itemized deduction? All kinds of things from education and business-related expenditures to medical costs.
  • *To figure out whether your standard or itemized deduction would be larger, consult an online calculator like TurboTax's Deduction Finder.
  • Deduct charitable contributions. If you are itemizing your deductions, you can deduct charitable contributions from your tax bill. Your gift must meet certain criteria to be tax-deductible including its amount and the type of organization it was made to. You must have a written acknowledgment of the contribution from the organization to claim the deduction. Consult IRS Publication 526: Charitable Contributions for additional information, and fill out IRS Form Section A  Opens as PDF File to claim the donation as a deduction.
  • Triple check your return. Even if you've prepared your return online, you should print it out and read through it carefully. You want your form to be complete and accurate cause nobody likes hearing from the IRS a few months later. If you are mailing in your return, don't forget to sign it.
  • Get an extension. If you can't file your return by April 15th, get an extension. By filing IRS Form 4868 Opens as PDF File, you are automatically granted a six month extension. You don't even have to tell them why you need it. Just file the form on time. Keep in mind, however, that this is an extension of time to file your return, not an extension of time to pay your taxes.
  • Request an installment plan. If you owe more taxes than you can afford to pay, don't panic. Apply for an installment plan. You qualify for this plan if you don't owe more than $25,000 and are able to pay off your bill within five years. To apply for an Installment Agreement Request, you must fill out and submit Form 9465.  Opens as PDF File
  • Avoid an audit. There's no way to guarantee that you won't be audited as a certain number of returns are chosen every year at random for the honor. However, you can avoid raising any red flags and be sure that any audit you are subjected to goes smoothly by not rushing when you do your return, staying honest, keeping good records and asking for help when you need it.
  • Plan for next year. Get a jump on next year's taxes by filing your receipts in envelopes marked with the types of deductions people usually take—business meals, business travel, medical, etc. Consult MSN Money's "Putting the Envelope System to Work" article for more organizational tips.

Have any more great tips for Tax Tips? Post your tips to the discussion board or email them to Julia: Julia at mahalo dot com.

Resources for Tax Tips

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File Taxes Online

IRS Resources

IRS Tax Topics

IRS Forms