Copyright 2016 Sweet Doll Designs
I know by writing this post, I will be revealing myself as a major dorko, but here goes, anyway 😉
While Accounting is my profession, I am not, nor do I ever have the desire to be, a tax accountant. Having said that, I always prepare my taxes by hand, check my work on Turbo Tax, then I file my tax return through the mail. I do this partly so that I fully understand how my taxes are being calculated and partly because I don’t want to pay Turbo Tax to file my returns for me.
Over the years of filling out my 1040 form myself, I’ve discovered that the IRS includes really helpful line-by-line information in the form’s accompanying instructions. With that in mind, here’s my big tax tip that will only take a few minutes, but has the potential to save you money:
Read the 1040 form instructions!
Specifically the section on Adjusted Gross Income, which can be found if you scroll down to page 31 of this pdf document: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf. Dorko alert: I read through each of these potential deductions carefully to see if I qualify for any of them. By doing so, I found that I qualified for one – you may be pleasantly surprised that you do, too!
There are only 13 possible deductions in this section, so it won’t take you long to read the instructions. Examples of popular deductions are: student loan interest, tuition and fees, IRA, HSA, moving expenses, and alimony paid, to name a few.
It is also worth your time to read the Tax and Credits section found on page 38 of the same pdf document: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf. There are only 7 credits to read about, so again, it won’t take much time. In this section are credits such as: retirement savings contributions credit, residential energy credit, child tax credit, and education credits, to name a few.
I have always found that reading the IRS-provided instructions while filling out my taxes has been very helpful and well worth my time. Also, if I have any questions when reading the instructions or am not familiar with a referenced form, I just quickly look it up on the IRS website. I know it may seem scary, but the IRS website is really very easy to use and understand, helpful, and informative!
Good luck with your tax returns this year! Remember to file by April 18, 2016.
Fun fact for today: Have you ever wondered what the difference is between a tax deduction and a tax credit? A deduction is taken before calculating your Adjusted Gross Income (otherwise known as your AGI). Your taxes are calculated on your AGI less the itemized or standard deduction and less your exemptions. On the other hand, credit provides a dollar-for-dollar reduction of your tax due, since any credits are subtracted from the tax amount due. A deduction isn’t better than a credit and vice versa, but it’s important to be sure you claim all available deductions and credits if you qualify for them! (Source: https://www.irs.com/articles/tax-credits-vs-tax-deductions)
Disclaimer: This blog post is not intended to be tax advice. For answers to your specific tax questions, please consult a tax professional.