Get organized. You can
significantly reduce the amount of time that it takes to prepare your tax
return if all of your financial records are in one place. You will want to make
sure that you have all your income and deduction documents handy and a copy of last year's
tax returns available for reference.
Don't procrastinate. If
you have lost paperwork or if some information is missing, waiting to the last
minute may prevent you from obtaining all the forms and documents that you need
to file your tax return on time. Types of income include:
Types of income
that may be exempt include:
- Paid earnings from
employment including bonuses and commissions.
- Gains from investments
including dividends and profits from the sale of an asset.
- Social Security
- Tax refunds for the
- Pension income.
- Miscellaneous income
such as interest on a savings account and rental fees.
- Monetary prizes and
- Scholarships and
Here are some deductions that everyone receives. To tax
professionals, they are better known as "above the line deductions."
- 401(k) salary
- 403(b) salary
- Child support payments
- Life Insurance
- Certain employee
Here are some
deductions you receive only if you itemize*. To tax professionals, they are
better known as "below the line deductions."
- One-half of self
employment taxes paid.
- Self-employed health
insurance premiums (limited).
- Alimony paid to an
- Contributions to a
traditional IRA (limited).
- Qualified moving
- Student loan interest
- Penalty paid from
prematurely cashing in a certificate of deposit.
- Medical expenses
(costs that exceed 7.5% of your Adjusted Gross Income).
- State and local
- Monies paid related
to property including real estate taxes and mortgage interest.
contributions (qualifications apply).
- Casualty and theft
*If your itemized
deductions do not exceed the standard
deduction; it is better to take the standard deduction.
These lists do not
include every possible item. If you have a unique situation or a question it is
best to ask a professional or the IRS. The
links below will help you find a professional in your area.
This is just a brief
overview. For more information on taxes, check out these resources
and on the World Wide Web:
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Ways to File
When you are ready to sit
down and put together the pieces of your tax puzzle, here are your
- Paper File: If you are
traditional or just like the feel of putting pen to paper, you can: 1) order
the forms you need by calling 1-800-TAX-FORM (1-800-829-3676), 2) printing copies of current tax
forms, or 3) picking them up at most local
IRS offices, participating libraries, or post offices.
If you are ready to toss the paper aside, filing electronically is an option.
Last year over 40 million Americans used IRS e-file to file their income tax
return electronically. The IRS e-file program offers a fast, accurate, safe,
and convenient alternative to filing a traditional paper return. Note that
downloading or purchasing
software is required and you will be charged a fee for this.
The other paperless option is to file over the telephone. If last year's return
met the requirements for Form 1040EZ, you maybe able to use this interactive
computer system that automatically calculates your tax and begins the
electronic filing process over the telephone. It's quick, easy, free, and
available 24 hours a day, seven days a week using a toll-free number. If you
qualify, you can order a TeleFile tax package by calling
What's New in 2002
Listed below are a few of
the new tax laws that we have for this year. The others can be found on the
"New For You 2002" section of the IRS website.
- Individual income tax
rates are reduced.
- Alternative Minimum
Tax exemptions increase by $4,000 for joint filers and $2,000 for single or
Head of Household filers.
- Child tax credit has
increased to $600 per child.
- The Tax Payer Advocate
Service represents tax payer's concerns within the IRS. Call 1-877-777-4778 for
more information about this service.
- Many individuals will
have new addresses to file their tax returns. You can check online to find out if
the address you need is correct.
Information Is at Your Fingertips
If you have any tax
questions from "how long should my refund take" to "what is a refund", the
answers may be just a click away. Internal Revenue Service online information
H&R Block online information
If you need a serious
break, the Tax Planning: U.S.
website has a Tax
Humor link along with a plethora of useful information.
If this is April Fool's
Day and you are starting to panic because things are not coming together as
nicely as you had planned, don't worry. You still have options.
If you can't immediately
pay your taxes, one option is to set up an installment
agreement. You can do this by filing a Form 9465 or calling
1-800-829-1040. This installment option will allow you to pay what you owe in
monthly payments rather than one lump sum. Note that if you must make payments,
interest and penalties will apply. If that does not fit your particular
financial situation, you may have a special case and be eligible for the new
Tax Payer Advocate Service.
If the clock is about to
run out, request an extension of time to file. You can get an automatic
four-month extension of time to file, to August 15. Call 1-888-796-1074, e-file
or mail a Form 4868
to the IRS. Note that the extension does not give you more time to
pay any taxes due. You will owe interest on any amount not paid by the April
deadline, plus a late payment penalty.
information on other popular consumer issues check out our Consumer Focus