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Things to Know - Before You File Your 2008 Tax Return
If you haven’t had your taxes started by now, maybe you are still
trying to decide how you will go about getting them done.

Filing your tax return properly will usually result in a sizable tax
refund. There are number of ways to file tax return without crawling
through the forms or even hiring a tax professional. When your
adjusted gross income or types of reportable activities exceed certain
level it is always advisable to consult a tax guru.

1) Free Tax Preparation Software – Careful:

Not all “Free tax preparation software” or “prepare your tax return
free” – sites let you print and file your return for free. Some sites
allow you to prepare, e-file, or print your return for free on their
own website only.

“Downloading software and preparing the return is more secure way than
uploading your personal data on unknown website”-Taxguru said.

IRS offers Free File, which may be a fast, free and easy way to
prepare and file a tax return, if adjusted gross income is $56,000 or
less for 2008. Free tax preparation is available through the Volunteer
Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE)
sites in many communities. Income limit may apply.

2) Helpful Hints When Choosing a Return Preparer / Tax Guru:

• Be cautious of tax preparers who claim they can obtain larger
refunds than other preparers.
• Avoid preparers who base their fee on a percentage of the refund.
• Consider whether the individual or firm will be around to answer
questions about the preparation of the tax return months, or even
years, after the return has been filed.
• Check the person’s credentials. Only attorneys, certified public
accountants (CPAs) and enrolled agents can represent taxpayers before
the IRS in all matters, including audits, collection and appeals.
Other return preparers may only represent taxpayers for audits of
returns they actually prepared.
• Find out if the preparer is affiliated with any professional
organization.
• Ask friends and family whether they know anyone who has used the tax
professional and whether they were satisfied with the service they
received.
Reputable preparers will ask to see receipts and will ask multiple
questions to determine whether expenses, deductions and other items
qualify. By doing so, they are trying to help their clients avoid
penalties, interest or additional taxes that could result from an IRS
examination.


3) Preparing Return Yourself:

If you are preparing the return your self, make sure your return is
mistake proof. Most common mistakes include: wrong SSN, address and
names of taxpayer, spouse or dependent. Wrong filing status, math
error, missing personal information on the payment check, not
attaching required forms including W-2 and schedules and forget to
sign and date.

Filing an extension by April 15, may not avoid penalties. You need to
pay taxes due by that day, if you owe.

You may also check your 2008 refund online using Where’s My Refund? 72
hours after IRS acknowledges receipt of an e-filed return or three to
four weeks after a return is mailed.

Record keeping is very important. Keep your returns and supporting
documents for a minimum 3 years from date of filing return. The
statute of limitations for IRS audit is 3 years unless you under
reported your income by more than 25%, where limitation is 6 years. No
such limitation applies if matter is related to tax fraud or if you
fail to file your tax returns. Though it is not required, you should
keep all your tax returns and W-2 for your life. Contributions to your
retirement accounts and annual statement from nondeductible IRA should
be maintained for life as well. Basis of stock / mutual funds
purchased should be kept for at least until 3 years after the stock is
sold. Title deed, purchase or mortgage agreement, sales contract and
receipts of capital improvements should be kept in safe as well.

4) Where to Look for Help:

Many websites provide free tax information. But you should be careful
as to who are you asking to for your help. If a website / tax portal
is supported by only one preparer (like most websites), then the
chances are that the preparer might be soliciting you for his
business. Now, practically all information can be found online. You
can ask any of your tax questions free on Tax forum and get answer
from several tax gurus anywhere in US. You can find free tax info,
tables / charts, news on TaxGuruHelp.com.

IRS.Gov is available 24/7 with all information, forms and
publications. Publication 17 and 1040 instructions are handy tools and
can answer most of your questions.

5) Additional Tips:

Every dollar of your taxable income is not necessarily taxed at the
same rate.

If you get a big refund each year, probably you’re having too much
withheld from your paycheck or your estimated tax payments are too
high. It is like giving the IRS an interest free loan! Use IRS
Withholding Calculator, which help taxpayers to make sure the amount
of income tax withheld from their pay is not too high or too low.

You can manage your chances of being audited!

Any information that you receive, is also sent to IRS including W-2,
sale of stock and all 1099’s, and 1098’s. Double check the amounts on
return ties to respective forms.

Tax planning should start when your short term and long term
investment decisions are made and not when you sit to prepare your tax
return.

You might be surprised how much each tax credit, tax break or tax
deduction can add up to over years. Subscribe here to get free tax
tips or news delivered in your email once every week. Daily tax tips
for 2009 might be worth reading as well.

Hope this helps!

Richard


www.richard.bonilla.com
tax & accounting services / front range