Tips For Tax Season
If you're confused about your taxes, listen up; Stephanie AuWerter, Contributing Editor for SmartMoney.com, has some advice to make things easier.
While most Americans need to file a tax return, some don't meet the income requirements. "If your income was very low last year, you may be off the hook. For most singles, that's... $8,900. For most married folks, that figure is $17,900," says AuWerter. However, there is an incentive to filing a return this year; if you didn't get the full government rebate amount last year, you may be able to make up for that lost amount by getting a credit on this year's return.
One common tax fear is having your return audited. While only roughly 2% of tax returns are audited, last year was the highest audited year on record for the past decade. "The more creative you get with your tax return, the more likely you are to be audited," says AuWerter. Potential red flags include home office deductions, deductions made on side businesses, and excessive non-cash charitable donations. "If you're taking more deductions than other folks in your income range, you should be on your toes," says AuWerter.
It's also important to remember the Alternative Minimum Tax, or AMT. "This is an alternative tax system that was created to make sure that the wealthy didn't weasel their way out of their tax bills," says AuWerter. However, as salaries increase with inflation, an larger number of middle class families are being hit with the AMT because they meet the income requirements. "Crunch the numbers to see if you are eligable for it," adds AuWerter.
Once all your calculating is done, some people still owe money to the government. If you aren't getting a refund this year, don't pay your taxes with a credit card. "It's very convenient, but it's not very cheap. For starters, in addition to whatever interest rate you pay on your credit card, you're going to get hit with an additional 2.5% 'convenience charge'," says AuWerter. Depending on how much you owe, that can add up to a lot of money. AuWerter suggests looking into alternative methods of payment instead. Even if you have to borrow the money from a wealthy relative, you might be better off than charging what you owe.
For more information on taxes, as well as additional personal financial advice, click here to visit www.SmartMoney.com.
By Erin Petrun