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10:10 AM / Tuesday August 4, 2020

12 Jan 2014

Doing your own taxes? Here’s what you need to know

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January 12, 2014 Category: Color Of Money Posted by:

More than 43.6 million Americans prepared and e-filed their own income tax returns in 2013, up 4 percent from the year before, according to the IRS. In addition to being more affordable than a storefront or accountant, online and mobile solutions have made doing your own taxes exceptionally easy and fast.

“Consumers now have everything for filing their own tax returns right at their fingertips,” says TaxACT spokesperson Jessi Dolmage.

The programs ask simple questions, covering tax law changes and maximizing your credits and deductions. After e-filing, you can be notified when your return is accepted by the IRS, and solutions like TaxACT help you check the status of your federal refund.

The process is already easy and fast when doing your taxes online or with a mobile app, but to make it even more of a cinch, follow these tips:

1. Gather and organize your tax documents beforehand, including a copy of last year’s return.

2. Don’t wait until the last minute. Rushing often leads to errors.

3. Do an apples-to-apples comparison of do-it-yourself tax solutions. Some require you to upgrade if your return requires additional tax forms. You can avoid the gimmicks with TaxACT Free Federal since it includes all e-fileable forms for simple and complicated returns.

4. The Affordable Care Act will have little to no impact on most Americans’ taxes this year, but you may need to report information about your health care costs on your return. The amount you and your employer contribute to your employer-sponsored health coverage will be on your Form W-2 in Box 12, with Code DD. Although you must report the amount on your return, it does not impact the amount of tax you might owe. It’s there simply to help you compare costs of coverage. Just enter the amount when prompted by your tax solution.

5. E-file your return and choose direct deposit for the fastest possible refund. Unlike paper returns, e-filing allows you to know when your return has been processed by the IRS.

6. Your tax program is like having an accountant at your side. The interview walks you through all the tax law changes, credits and deductions, but here’s a peek at a few of the key tax breaks available on returns due April 15, 2014:

•  American Opportunity Credit – This is worth up to $2,500 per student for the first four years of college costs in a degree or certificate program. Costs may include tuition, fees and books. You also may be eligible to receive up to 40 percent ($1,000) as a refund.

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•  Tuition and fees deduction – If you, your spouse or your dependent are enrolled in college, you may be able to deduct tuition, even if you don’t itemize deductions. You generally take this deduction if you don’t qualify for an education credit or other tax break for the same expenses.

•  Educator expenses deduction – Elementary and secondary educators can deduct up to $250 in related job expenses for books, supplies, computer equipment, other equipment and supplementary materials used in the classroom. Unlike most employee expenses, educator expenses are not reduced by 2 percent of your adjusted gross income.

•  Child and Dependent Care Credit – The maximum amount for the credit is now $3,000 if you have one child or $6,000 if you have two or more children. The children or dependents must be younger than 13 and childcare must be needed because parents work or attend school.

•  Child Tax Credit – The now permanent credit is $1,000 per child younger than 17. This credit may be claimed in addition to the Child and Dependent Care Credit.

•  Adoption credit – If you adopted in 2013, you may qualify for a credit up to $12,970 of your adoption expenses, including fees, court costs, attorney fees, traveling expense and other expenses directly related to and for the principal purpose of adopting an eligible child. If your employer provides adoption benefits, you may also be able to exclude up to the same amount from your income. Both a credit and exclusion may be claimed for the same adoption, but not for the same expense.

•  Deduction for mortgage insurance premiums – Also known as private mortgage insurance (PMI), you may be able to deduct mortgage insurance premiums as mortgage interest.

•  State and local sales tax deduction – For 2013, you can still deduct state and local sales taxes. You can take this deduction or a deduction for state income tax – but not both.

Learn more about these tax benefits at www.irs.gov and www.taxact.com/taxinfo. File your federal taxes free with TaxACT Free Edition at www.taxact.com.

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