Tax Tips for Tax Season 2011-2012

There are some basics that can help you to remain federal tax compliant and not overlook valuable deductions from taxable income or even-more-valuable tax credits (dollar-for-dollar off your federal tax obligation).   These tips should help:

<>Organize your information and documents into three groups: Income, deductions and tax credits.   Keep all tax data in the same place (a drawer, a shoe box, whatever...just don't put it in your glovebox, on top of your refrigerator or anyplace else where it might be lost or accidently thrown away.

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<>Get your family involved.   Ask your children and others in your household to NOT throw away or lose anything from any employers, banks, educational institutions, investment brokerages, mortgage holders, etc. received from January 1st through at least Monday February 6th (most employers and other tax-related entities must mail you via USPS or by e-mail or online year end statements by postmark deadline of January 31st 2012).   Also: If you have college or tech school students (who are also dependents)  in your household, ask that they not file their tax returns until you first file your own (this tip alone sometimes saves parents thousands of dollars on their federal returns).   Show your kids how to address getting federal tax data together...they will themselves need this learned skill in the years to come. 

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<>Don't wait until the last minute.   Forms and instructions are available at www.irs.gov and sometimes also at public libraries and post offices, but don't put off work on your federal tax return because the longer you wait after February 6th 2012 the more difficult things can get.   About "do-it-yourself (DIY)": If you do your returns manually, first download or read online IRS Publication 17 on the matters that pertain to you and your circumstances, then lay hands on paper forms from the sources I've already recommended.

If you DIY with "over-the-counter" tax software, you will still need to read IRS Publication 17 to insure that you don't overlook anything that can ethically and legally lower your tax burden.   WARNING: No over-the-counter tax software has ever been fully tax compliant before March 15th of the following tax year.   That is also the reason why you must update the software online to make corrections in the other-wise inaccurate or incomplete tax program.   If you DIY this year with tax software, I highly recommend that you not file until at least March 16th 2012 after the final updates on your tax software.   You can also DIY at www.irs.gov using their "free-file" program and you can e-file from there as well...but if you have any "complications" of any kind, you would be wise to not DIY at all, but should instead take those tax chores for handling to your local Enrolled Agent (federally licensed and always also specifically-taxation-skilled), a CPA or a tax attorney for best results and the least likelihood of generating a "nasty-gram" later from the IRS.

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<>Ask for help.  You can contact the IRS itself  at www.irs.gov and read about specific taxation concerns; you can even call them and discuss things with an IRS agent.   They same is true of over-the-counter tax software providers.   Or you can visit your library and read the forms and instructions, or get your own copies of forms and instructions at your local post office for less-complicated issues.   Do NOT expect a tax professional to answer questions on complicated issues without charging a fee for such services...if they have an expertise in federal taxation, it cost them time, effort and money to learn and know how to assist you...they are worthy of their hire and their fees for assisting you.   This is how they earn their living and support their families, so pay them their due when they assist you.

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<>Double check: Mathematic errors, incorrect names and social security numbers, an overlooked taxable income, etc. can create more than its' share of grief and stress on you and your wallet.   Always proof read and make sure your tax return is accurate and detailed fully before signing it and then sending it (electronically is the best) to the IRS.

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<>E-file whenever possible: Avoid sending in a paper return if possible...it simply takes longer to notify you if there is an error on your return, delays your refund and slows your payment when you owe (a payment just a  day can late can cost you $$$).    IRS has e-filing instructions at www.irs.gov and you can also accomplish that task through your tax preparation professional as well.

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<>Use direct deposit for your refund.   The mailing of a tax refund check to you is a far slower process than by e-filing and you run a greater risk of loss of your check when you get a paper check in the mail than by direct deposit into your checking or savings account at your bank or credit union.

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<>Start preparing for next year.   Separate tax related items into 2011 and 2012 "evelopes" or even shoe boxes or files that you can refer to in the future and keep them where it will be easiest to find them for the next three years.   Your tax return copies and supporting statements and receipts should be kept together by the year and never co-mingled with other tax years.

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<>Minimize trading in taxable accounts.   Put more simply: if you must trade in the stock market, do it in our IRA or Roth account, but not in a taxable account if you can help it.   A few dozen to a few hundred transactions in a taxable account can be a nightmare to deal with in the tax return next year.   Avoid it if you can.

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<>Be honest with the IRS.   They are getting better each year at matching incomes to social security numbers, they have more field auditors on doorsteps and in workplaces than ever before, and they are paying higher fees to "whistle-blowers" who turn in other taxpayers to either "plea bargain" to stay out of prison or simply for the potential earnings for playing that part in the IRS web of information gathering.   Smart people do not mess with the IRS...you are not smart enough or rich enough to make "messing with the IRS" profitable, but if you think you are, then you need to see a doctor right away!