Automated refund information. Before you call the TeleTax number or click on the “Get Your Refund Status” link on the IRS website homepage (www.irs.gov) to check on your refund, have a copy of your tax return handy. In order to get refund information, you need to know the first Social Security number shown on your return, your filing status, and the exact whole-dollar amount of your refund.
Toll-free tax help. The IRS prefers that you contact a local IRS office to rap about your tax questions, but help is also available at 800-829-1040. Remember to have the necessary information at your fingertips to help you get to the root of your question or problem. Be sure to obtain the person’s name and record the date (as well as the time of the call) just in case.
IRS Problem Resolution Program. Any problems you have that can’t be resolved through normal channels may qualify for the IRS Problem Resolution Program. Begin this journey by calling 800-829-1040. Explain your problem to a specially trained representative who will try to fix it. If the representative can’t fix it, they will evaluate your case to see whether it meets the necessary criteria for the Problem Resolution Program. The IRS representative will then assign you to a caseworker at your local district service center. This process may take some time on the phone (keep notes to document your calls), but it’s generally better than corresponding by mail.
Last-minute tax tips
Double-check your return for mistakes that can cost you money, time, and audits. Put your name and Social Security number on every page, check the arithmetic, attach W-2s and any 1099s where federal tax was withheld, and sign and date the return. Verify items you’ve transferred over from last year’s return to this year’s return. If you’re filing electronically, you don’t need to send your W-2s and 1099s; instead, keep them with a copy of your return.
Scavenge for overlooked deductions and credits, especially if you’re self-employed. Peruse this book, which is filled with all sorts of legal ways to reduce your federal income tax bill with deductions and credits. Determine whether you can save money by electing the filing status of married filing separately or head of household.
Make sure the data is correct on the forms that you receive from financial institutions and your employer(s). These forms sometimes contain mistakes. Follow up promptly with the document’s issuer to get errors corrected.
File your extension (Form 4868), if necessary, to allow yourself enough time to fill in the forms correctly and ensure that you take all the deductions to which you’re legally entitled. Don’t make the mistake of waiting until you have the money to pay before filing. The penalty for doing so can be as much as 25 percent of the tax that you still owe. Ouch!
Keep copies of everything that you file with the IRS and your state and obtain a mailing receipt if you file at the last minute and a lot of money (or a big issue) is at stake. You’ll need documentation if you ever get audited. You may need copies of your return for other purposes, and the data on your tax returns can provide valuable insights.
Time-tested strategies for tax-wise living
Use tax laws to reduce your taxes. If you educate yourself about the tax laws and incentives, you can dramatically and permanently reduce the taxes that you pay over your lifetime. Now, more than ever, with the recent major tax law changes, it pays to understand tax-reduction strategies.
Use retirement accounts as a simple but powerful way to reduce your income taxes. The newer tax laws dramatically increased the amount you can contribute to these accounts. Lower-income earners also can get free government matching money from contributions.
Take control of your taxes. Find out enough about the tax laws so you can prepare your own return (perhaps by using software) or intelligently hire a good tax preparer. Don’t forget to review your return when someone else prepares it.
Try preparing your own return. If your situation hasn’t changed since last year, you’re probably wasting your hard-earned dollars paying a tax preparer to plug your new numbers into this year’s return. Unless your finances are complicated or the tax laws have dramatically changed in an area that affects you, try preparing your own return. If you get stuck or want another opinion, you can always go to a preparer at that point or try using tax software.
Get, and stay, organized. Try keeping your tax and financial documents organized year-round. This practice saves many hours not only when you prepare your tax return but also when you make important financial decisions.
Remember that the IRS isn’t always right. Whether providing advice over the phone or challenging taxpayers’ returns, the IRS makes mistakes, so don’t panic if you get a notice from Uncle Sam. If you haven’t knowingly cheated or defrauded the IRS, you have little to fear from audit notices or other IRS letters. Calmly organize your supporting documents to prove your case.
Learn from your return. After you’ve gone to all the time and trouble of preparing your tax return, don’t let that effort go to waste. Use the information to identify areas for better financial management in the coming year.
The more you consume, the more you pay in taxes. As you earn and spend your income, you not only must pay income tax on your earnings, but you also incur sales tax and other taxes on your purchases. Moreover, many of the best tax breaks available for people at all income levels are accessible only if you’re able to save money to invest.
Invest tax-wisely. Don’t overlook tax implications when investing your money. Remember, it isn’t what you make, it’s what you get to keep that matters.
Don’t buy real estate only for tax purposes. Owning your own home and other real estate can be an investment that helps reduce your taxes. But don’t purchase real estate just because of the tax benefits — these benefits are already reflected in the price that you pay for a property.
Know when estate planning matters. Use the tax laws to your advantage so that your heirs and others get more of your money. Read up on this issue so that you know when and what you need to do to arrange your financial affairs.
Keep taxes in perspective. Life has so much more to offer than just working and making money. If you do such a good job reducing your taxes that you gain great wealth, don’t forget to enjoy it and share it with others.