While Julius Caesar may have been warned to “Beware of the Ides of March,” most Americans are more fearful of the “Ides of April” – also known as “Tax Day.”
In 2011, Americans get a three-day reprieve with the deadline for filing taxes being extended until April 18 due to “Emancipation Day” falling on April 15. But while the additional time may delay the pain of forking over your hard-earned money to the Internal Revenue Service, why not get a head start on your 2011 taxes?
Here are six ways to save money on your taxes:
1. Take advantage of pre-tax deductions. If your employer offers an FSA (Flexible Spending Account), HSA (Health Savings Account), 401(k) or other retirement savings account, reduce your tax liability by contributing as much as possible. With an FSA for medical expenses, you’ll want to make sure to carefully budget projected annual costs, because it’s a “use it or lose it” proposition.
2. Adjust your withholding. Many taxpayers use withholding as a sort of forced savings plan. In reality, you’re just giving Uncle Sam a tax-free loan. If you consistently receive a large tax refund every year, consider upping the number of personal exemptions on your W-4 form. You can take the additional money in your paycheck and deposit it directly into an interest-bearing account. That way you are still forcing yourself to save the money as well as earning interest over the course of the year.
3. Take advantage of tax credits. Even if you don’t itemize, you could be eligible for one or more tax credits such as up to $8,000 for qualified homebuyers, up to $1,500 for energy efficient home improvements, up to $2,500 for parents of college students and more than $13,000 per child available for adoptive parents.
4. Maximize your refund or reduce your liability with professional assistance. If you have a complicated return, hiring a professional to do your taxes could be a wise investment. Whether it’s a tax preparation firm like H&R Block or an individual CPA with tax expertise, a qualified preparer can save you hundreds or even thousands of dollars with their in-depth knowledge of the various deductions available to you. And the cost of tax preparation can be declared as a deduction on your tax return in the same year for which the cost was incurred.
5. Seek out money-saving deals and coupons. Whether you’re purchasing a copy of Turbo Tax or enlisting the aid of a tax professional, check coupon sites like Savings.com for tax deals to discount the cost of that tax software program or tax preparation services. While those costs are deductible, it still makes sense to reduce them as much as possible.
6. Free e-filing saves money and time. At freefile.irs.gov, taxpayers can access safe and IRS-approved options for filing their federal returns. The software that generates the return is provided via a partnership between the IRS and commercial tax software companies. So you get access to the database of available deductions, updated tax rates and automated step-by-step processing if your adjusted gross income was $58,000 or less. Those earning more than $58,000 can access forms to fill out and file for free online.