From January 1 to April 15 is the time when most people clamor to have their taxes prepared. Taxes must be postmarked by April 15 for the taxpayer to avoid penalty. As a taxpayer, it helps if you are knowledgeable about various tax laws and codes to maximize your deductions.
Gather all your documents. You will need your W-2, statements of interest paid for home or school loans, receipts for charitable contributions and any information pertaining to your dependents. Enter information from your W-2 into the tax preparation software. Many popular tax preparation programs are available for you to use, like Turbo Tax. Determine if you have income from other sources, such as, dividends from stock.
Income and Deductions
Enter the names, relationship, date of birth and Social Security numbers of all dependents. Indicate if your dependents live with you and, if so, for how many months. This information will help you determine if you will receive additional exemptions for your dependents.
When you proceed to the deductions section of your taxes, go through every section carefully, so as not to miss any deductions you may qualify for. For example, if you are a new homeowner, you may receive a deduction for mortgage points paid when you purchased your house.
Include deduction items, like payments on a student loan. Input any tax payments, or big purchases, like a new vehicle, into your tax preparation software. If you run a business from home, you may be able to claim additional deductions, such as, for your home office. Do not forget to list any meals and travel expenses. If you paid medical expenses for the tax year in question, be sure to input that information as well.
If you are a member of a union and if you are responsible for buying your own uniforms, you may be able to write those expenses off too. Payment for daycare expenses, or tuition paid at a private school, may help reduce your taxable income in the form of a write-off.
All these are typical itemized deductions that will help you minimize your tax liability. Educate yourself on actions you can take to maximize your deductions in the future, like buying a home.
Closing the Return
After you have completed the tax return, review it. Check the tax return for errors and discrepancies. Notice any tax due or refund you may receive. Observe instructions on how to properly mail off your return. If e-filing, make sure your banking information is correct.
Make copies of all your tax forms. Shred all documents you do not need to protect your privacy. File your tax return in a secure file. You may need to keep your tax return for 3 years, in case of an audit.