Traffic is brisk on the Internal Revenue Service website, with nearly 300 million visits in 2010, up 2.4 percent from the year-ago period. The online traffic at IRS.gov includes visits from professional tax accountants, who prepared about 64 million of the 99 million tax returns that were filed electronically last year.
[See Your Guide to the New Tax Credits.]
“Tax laws change constantly. You have to keep up with the law to know what deductions are available,” said Arnold Insler, a New York-based tax professional tax preparer. Here are five tax secrets from the pros to help you keep up with the changes:
Questions count
Ask yourself hard questions about the past 12 months. Identify major milestones or life-changes. New responsibilities, such as caring for an aging parent or sending a child to college, could yield tax benefits for you, according to tax professionals. Ignorance can be costly. “You could miss out on money,” said Elaine Smith, a tax advisor at H&R Block.
For example, there’s financial relief for the “sandwich generation,” a category of taxpayers who are supporting their own offspring and elderly parents, according to the tax experts. Under the “qualifying relative exemption,” tax payers may be eligible for $3,650 in expenses for medical care, education, food and housing. To find out if you qualify for different deductions, check out the “Am I Eligible” tool and other online resources at IRS.gov. (See also: Should I Itemize My Deductions?)
Make the right match
Search for a tax expert with experience related to your situation or career, Smith said. Depending on your circumstance, you may need an expert in investments, small business or self-employment. A tax specialist in the home daycare field, may have more knowledge about the deductions in that industry.
“Look for someone who asks a lot of questions,” Smith said. A professional who probes through the details of your life—including updates about home improvement projects and employment outlook—will be more skilled in hunting down deductions and tax savings for you.
File early
It doesn’t pay to wait, said Mark Steber, chief tax officer at Jackson Hewitt Tax Service. Here’s the logic: Roughly 75 percent of tax filers receive a tax refund, with the average refund check totaling more than $3,000. If you file early and electronically, that refund check will be quickly sent to you. And if you’re in the 25 percent of taxpayers who owe money to the government, no matter how early you file, your payment is not due until April 18.
“Filing early doesn’t mean you have to pay early,” Steber said. What’s more, filing early gives you the time and flexibility to study and arrange payment options, which include an online payment agreement (OPA) or a long-term installment plan.
[See Why You Should E-File Your Taxes.]
Understand trends
Track down enforcement trends. From year to year, enforcement of tax regulations varies, said financial planner Arnold Insler. For example, several years ago regulators took a tough stance on home-office deductions. But with the emerging popularity of telecommuting, Internet-based businesses and work-from-home agreements, the IRS seems to have relaxed its enforcement of home-office requirements for qualifying deductions, Insler said.
Make a 12-month commitment
Preparation for tax season is a year-round process, said Smith of H&R Block. Preparation includes ongoing organization and education. “It’s a 12-month job, with constant reading and constant research,” said Insler. “You wouldn’t want to go to a doctor who opened up for your surgery and didn’t do anything else for the rest of the year.”
Sharon Harvey-Rosenberg is a member of Wise Bread’s top personal finance blog network. She is the author of "Frugal Duchess: How to Live Well and Save Money” and a contributing author to ”10,001 Ways to Live Large on a Small Budget.”
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Marsha Boyette of AR 10:36AM March 01, 2011
dawnclowe of TX 4:37AM February 23, 2011