It’s that time of year again. Time to get your taxes done.
“Tax time is a stressful time, although it doesn’t need to be,” says bilingual finance and management expert, Mike Periu.
Here are 10 tips he provides to make tax time a bit more enjoyable:
1. Before you assume you need to go to an accountant, evaluate if you need one. The majority of people fill out a 1040EZ which doesn’t require an accounting degree. It’s very simple and can be filled out in 10 to 15 minutes. By filling out your own taxes, you can save an average of $150. Just because you fill it out on your own, however, doesn’t mean you don’t have access to experts that can help you. TurboTax, for example, offers free access to certified public accountants via chat and phone support in both English and Spanish. Why go through the hassle when you can just do it on your computer?
2. Every year, the IRS adjusts the value of deductions to keep pace with inflation. In the case of the Child Tax Credit, it’s a credit not a deduction, and it stayed the same at up to $1,000 per child aged 17 or younger as of the end of 2012. Earned Income Tax Credit is $5,800 this year. According to the IRS, to qualify for EITC you must have earned income from employment, self-employment or another source and meet certain rules. Also, you must either meet the additional rules for workers without a qualifying child, or have a child that meets all the qualifying child rules for you.
3. People should not wait till the last minute. There’s some misinformation out there. People think because of the fiscal cliff, they should wait, but you don’t need to because programs like TurboTax and IRSPRO, have all been updated. If you wait until the last minute you run the risk of getting charged late penalties. Besides, the changes that the fiscal cliff will have on your taxes will take effect next year.
4. Many think you need to have a Social Security number to file a tax return. If you don’t have a Social Security number, you can apply for an Individual Taxpayer Identification Number (ITIN) — it doesn’t cost anything for you to apply, and you can use that to pay your taxes. You can also still fill out your paperwork online. It’s good to have a track record of paying your taxes.
5. When it comes time to pay your taxes, many miss out on credits and deductions, and thus don’t get as large a refund as they should. Programs like TurboTax ask you personal questions, and as you answer the questions, it automatically figures out your credits and deductions. Many Latinos are independent contractors. Six million Americans have home-based businesses — one out of every nine people qualify for the home-office tax deduction and don’t get it. Many don’t know they quality, and they pay more taxes than they should.
6. Eight out of ten people now file electronically, but many are still afraid, because they feel it’s not secure. However, the electronic method is very secure, because it goes directly into the IRS system. You get a confirmation almost right away, and you also get your tax refund in much less time. You can also track it on the IRS Web site where it is in the process, and then they deposit the money directly in your bank account.
*If you submit your tax return and don’t get a confirmation, you can call the IRS. Also, if you don’t get a confirmation, you should submit it out again. If you don’t get a refund, that is an absolute red flag. There’s a lot of identity fraud going on right now. If you don’t get a response, you should find out why — maybe somebody else got it instead of you.
7. If you prefer an accountant to filing yourself online, do a thorough check to confirm they are who they say they are. Confirm they are a certified public accountant (CPA), and that they are registered by the IRS to fill out a return for someone else. Many pay an expensive price for an “accountant,” and then the IRS sends a letter to the tax payer questioning their return, and when they go back to the accountant, they say, “It’s not my problem.”
8. Many are so afraid of an audit that they think if there is a mistake on their tax return, their house will be taken. In reality, it’s a very tiny percentage (a little more than 1 percent that you get audited). They just send you a letter to send more information. If they don’t agree with what you’re saying, they send you the amount you need to pay. There are also resources if you do get audited.
9. It’s important to be accurate and honest in your tax returns. Sometimes people think they can lie a little to lower what they owe. That’s considered tax fraud if you do it knowingly, or use an unethical accountant. Your tax returns are used when asked for credit. The bank wants to know if you make enough to buy the house or car you want. If you lowered what you make on your taxes, you won’t qualify for that loan. The amount of money that you’re going to save by not being honest on your taxes, is small for the amount you’re going to have to pay in financial benefits in the future.
10. It’s never too late to start filing a tax return. Many people don’t do it, because they make a low income and can’t pay someone to do it. However, several tax programs offer free services for people who make less than $31,000.