Blogging for Change

Preparing for tax time video

by Kim McGrigg on
3/24/2010
in Personal Finance

Have you thought about your taxes yet? If you’re like many Americans, you will procrastinate as long as you can—especially if you suspect that you might owe the IRS. But calculating your taxes before the deadline doesn’t mean you have to file early. What it does mean is that you’ll have more time to prepare for the results.

The first step is to estimate your taxes by visiting IRS.gov. If you are expecting a refund of more than $100, you might want to reduce your withholding amount so you don’t repeat the mistake. Getting a tax refund is never a good thing because what you’re doing is extending an interest-free loan to the federal government. On the other hand, if it looks like you will end up owing taxes, you can start saving. By brown bagging your lunch or reducing other daily expenses, you may be able to save as much as $100 a week.

You should also carefully research tax law changes at IRS.gov. There are many tax credits being offered this year and you want to be sure that you take advantage of any credits available to you.

Next, organize records of any itemized deductions. On average, one out of three of taxpayers itemize their deductions. Don’t forget that costs for things like medical expenses and child care may be deductible. And most charitable gifts are tax-deductible if made to a qualified organization. Just be sure any organization you support meets IRS guidelines as there may be different tax breaks when you donate certain types of assets to charity.

This is also a great time to plan for retirement savings. Fortunately, you have until April to reduce your taxable income by contributing to an Individual Retirement Plan.

And no matter what you do, it pays to file on time and, if necessary, pay on time. Don’t be tempted to pay your taxes with a credit card; the last thing you want to do is roll your tax bill into a revolving credit card balance. There are many institutions – including the government – who will loan you the money for a price. To request a payment plan, complete an Installment Agreement Request and attach it to the front of your income tax return.

To make filing your taxes quick and easy, consider using the Electronic Federal Tax Payment System (EFTPS). The EFTPS enables tax preparers, businesses and individuals to pay federal taxes electronically using a variety of payment methods. For more information about the free service, visit EFTPS.gov.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

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