It's that time of year again. But before you jump into doing your taxes, there are many things you should consider to maximize your refund. Farnoosh Torabi, author of Psych Yourself Rich and Blogger for CBS MoneyWatch.com, offers some tips on things you should consider before doing your taxes.
The first thing you should do before you file your taxes is boost your IRA savings. Contributing to a traditional IRA is a great way reduce your 2010 taxable income and to make sure you are saving for retirement. You have until April 18th to do this, and it must be done BEFORE you file your return. The only downside is there is a limit. For 2010, it's $5,000 if you're 49 or younger and $6,000 if you're age 50 or older.
There have been a lot of tax credits and deductions that have been extended from 2009 into 2010 thanks to late legislation from Washington in December. So know your deductions. For example, teachers can deduct $250 of out of pocket education expenses, such as classroom supplies again this year.
Torabi is also encouraging people to pay attention to deductible medical expenses. Because of the economy, many Americans are paying more out of pocket expenses for health care. This means more people are likely to qualify for these deductions this year. If you have had any dental or medical procedures, Lasik surgery or even had a child, if your out of pocket expenses total more than 7.5% or more of your adjusted gross income, all that money is deductible from your taxable income. So take a moment to really examine those expenses, you might be saving even more money.
One of the biggest hassles people experience when filling taxes is getting and staying organized. One piece of technology Torabi suggests to use if you are itemizing is an electronic receipt scanner. This piece of hardware plugs into your laptop or computer, scans a receipt, and then records the total and categorizes the expense information into your computer. No more worrying about whether or not your missed an amount. You can find a receipt scanner in any office supply store for $50 and up.
Once you have filed your returns, you can track your refund within 48 hours of filing online. The IRS has a free app you can download to your smartphone and it'll tell you when you are going to get your refund.
And remember: this year you have three extra days to file your tax return. Because of a holiday in Washington D.C., returns are due on April 18th. But don't use that as an excuse to postpone doing your taxes.