The single smartest move you can make this tax season is file early.
“I would say about 90 percent of people procrastinate,” said Diana Mammen, a certified public accountant and co-owner of The Mammen Group in Holland.
Luis D. Garcia, spokesman for the IRS in Michigan, said most people get at least some of their taxes refunded — one reason to promptly file the return, to get the money back in their pockets.
And he pointed out the government stands ready to help: it has worked with 20 software providers to provide free income tax filing software online for people below a certain wage.
“If you make less than $57,000, you can do your taxes free through IRS.gov,” Garcia said. “The program asks all the questions for credits and deductions and files your tax forms.”
Both Mammen and Garcia had plenty of tips for taxpayers.
Mammen said taxpayers most often misunderstand how to use charitable contributions. Donations should include some form of documentation, she said.
Another mistake people make is rushing to file their returns before getting all wage and other statements in the mail.
Garcia cautioned people planning to hire tax help to be wary of what he called “kitchen table tax preparers” who say “they know a ‘special way’ to get extra money, or they will guarantee you a refund or they say they’ll do your taxes based on a percentage of your refund. Those are red flags,” he said.
Other risks, he said, include identity or refund theft.
Someone else preparing a person’s taxes must also sign the forms. “By law, it’s illegal to take money for preparing a return and not sign that return,” he said.
Whether a person files themselves or uses a credible professional, Garcia said, requesting a refund as direct deposit can result in refund in less than two weeks.
He said electronic filing reduces the likelihood of errors causing your return to get bounced back for a correction.
And first-time homebuyers are required to file a paper return this year, he said.
Garcia said that now also is the time to start making next year easier, by setting up files.
“Disorganization leads to procrastination,” he said. “If you donate clothing or household items, you deserve that deduction. But if you don’t have the same place to put (tax-related) documents in time after time and you can’t find them, you don’t get to take those deductions. As corny as it may sound, a shoebox or a folder or one location for all those documents helps people.”
Those who end up having to pay additional taxes shouldn’t fret too much, either, Garcia said. The economic downturn caused the IRS to relax some rules about paying back taxes.
“Now we can work out pay plans that are really flexible and really fair,” he said. The worst thing you can do is avoid the back-taxes news; it’s important to file on time and work with the IRS. He said the burden of worry is often worse of people who owe than the actual payment arrangements.
Mammen said taxpayers are wise to check with their tax preparer about halfway through the year “especially with major changes in income” to better estimate the next tax filing.
For people receiving unemployment checks, Garcia offered the reminder that only the first $2,400 is tax free. He advises having taxes taken out of unemployment checks after that amount is reached to avoid surprises on your tax return
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