If you expect a large income tax refund it means you overpaid your taxes. Maybe you use it as a “savings” account – heck, with today’s savings rates it’s about the same as having stuffed it in your mattress. If you owe a large amount of income tax – whoa! Who did your get your tax and financial planning advice from last year? Ouch.
What can you do now?
Can you tuck away some money into your IRA? You’ve got until April 15 to make a tax-deferred IRA deposit and claim it on your 2011 tax return.
Find out for yourself what you can do – have a read through IRS Publication 17 “Your Federal Income Tax For Individuals” (For use in preparing 2011 Returns). This booklet is a MUST for every individual income tax return preparer. When I was in public accounting this was used as the first line of attack in preparing returns (second line was the US Master Tax Guide). The publication is FREE from the IRS and can be downloaded from their website in PDF format if you click on this http://www.irs.gov/pub/irs-pdf/p17.pdf
If you need to dig a little deeper there are a number of FREE topical tax return publications and forms. Check this out: http://www.irs.gov/publications/index.html The most popular are Pubs 501-505 that deal with Exemptions, Filing Status and Deductions. If you moved, have a home or want to know more about Charitable Contributions and/or Miscellaneous Itemized Deductions – check Pubs 521-530. If you’ve got a small business you will find Pubs 334 “Tax Guide for Small Business” and 463 “Travel, Entertainment, Gift, and Car Expenses” especially helpful.
Can you use a free federal tax filing service?
The IRS has its own “2011 FreeFile“. I am personally going to have a look at that! And if you don’t go with the IRS FreeFile there are a number of other businesses that will be more than happy to efile your federal income tax for “free” (certain restrictions will apply). To find out which companies they are just Google or Bing “free tax filing” and you’ll see a lot of well-known companies listed there. They make their money selling you a State filing for a small fee or offering you other fee-based services.
What about state tax filing?
For your information, I’d guess that at least 80% of the information needed for your state’s income tax return comes right off your federal one. You might head over to your own state’s income tax site and see if you can file for free there. For Californians it’s https://www.ftb.ca.gov/individuals/index.shtml Otherwise if you’re thinking of using a non-IRS free federal state return site you may want to check out how much they charge to efile your state return. It’s usually not a lot of $.
I wish you all HAPPY RETURNS!