There’s probably no day of the year that elicits more sighs and groans than April 15, but you can save yourself a lot of headache — and risk — if you take a page out of the early bird’s book this tax season. For one reason, it’ll speed your refund. Last tax season, close to 75 percent of taxpayers received a refund close to $2,800, says Lisa Greene-Lewis, CPA and tax expert for TurboTax. “For some people that’s the biggest paycheck they get all year,” she says, so consider using it to pay down holiday debt in order to avoid expensive interest down the line.
Another compelling motivator? Tax return identity theft — when fraudsters attempt to file under your name and collect your refund. “The quicker you file, the less likely you are to be a victim,” says Cari Weston, director of tax practices and ethics for the American Institute of CPAs. On the flip side, if you owe taxes, it’s better to know as soon as possible, so you have time to get the funds together. Finally, if you end up using a paid preparer, they get busier closer to the deadline, so it’s better to jump right in.
Convinced? As you get ready to file, here are three things to keep in mind.
Make sure you have your documents in order ahead of time.
Collect W-2s from any company you worked for over the course of the tax year. They should come to you in the mail, but if not, ask your employer’s (or prior employer’s) payroll person or HR department. If you’re self-employed, you’re looking for 1099 forms instead. Other documents and information to gather: How much you received in rental income, how much you received in bank account interest (if it’s over $10), your property tax statement and how much you paid in mortgage interest, tuition and student loan interest (you can deduct up to $2,500 on the latter). Finally, you’ll need proof of health insurance coverage.
Know where to file — and “shop around.”
If you’re filing a simple return, using tax software is probably the cheaper option. If you make less than $64,000 a year, you probably qualify for free tax filing, and you can access IRS.gov’s Free File program here. Otherwise, consider preparing on more than one tax site and comparing the results to check yourself (they usually don’t charge you until you actually file and submit). The return amounts displayed on each site should be the same, says Weston. If not, redo it and see where you went wrong. Then, once you’ve isolated the problem, choose to file with the site that offers you the lowest price.
If you’re confused about the process, IRSvideos.gov offers some instructional videos. And if you or someone you know needs extra help, the Volunteer Income Tax Assistance (VITA) program offers free in-person filing help all across the country. You might qualify if you make $54,000 or less, have a disability or speak limited English.
Know your deductions.
Each year, you have a choice between itemizing (noting every deduction separately which means gathering your receipts and other documentation) or taking the standard deduction ($9,300 for heads of households, $6,300 for singles and married people filing separately and $12,600 for married couples filing jointly). It’s all about figuring out which will net you the bigger refund.
So, first — are you a donation enthusiast? Gather up those receipts and annual giving statements. Then, were you on the job hunt this year? If you spent any money searching for a job in your same profession, whether you got it or not, you can deduct job search expenses — that could mean a plane ticket, an interview outfit or a taxi to get to an interview. If you move for a job, you might be able to deduct the moving van/truck and even the cost to move your pet. Next, ask yourself: Did I make any large purchases this year with high state sales tax (car, furniture, etc.)? You can deduct that, so dig up that receipt. Finally, if you’ve got a child, the earned income tax credit is an important one to note. One exemption (for one kid) is worth $4,050, and for families with three or more kids, it’s $6,269, says Greene-Lewis. If you’re using tax software, it will walk you through a series of questions on deductions and credits so that you can figure out if itemizing makes sense for you.
Sleep on it.
Finally, never file on the first try — unless it’s the last possible day to file. Prepare your return, enter it, look at the results, then sleep on it. “At least give yourself 72 hours because it’s very possible you missed something or made a mistake, and you won’t catch it the moment you enter it,” says Weston. “Let it simmer for a little bit before you push the button.” Most paid tax preparers do the same thing.