Tax Tips For Individuals

5 Tax Tips For Early Preparation

When it comes to working on your taxes, it’s always a good idea to get started early. In fact, the Internal Revenue Service recommends a solid head start – you’ll be ahead of the end of tax season rush and see your refund sooner.

Here are five simple and effective ways to get an early start on your taxes well before April 15 appears on your calendar:

Including forms like your W-2s and 1099s. Remember to make copies and save them in your records.
All the tax forms you’ll need can be obtained anytime at IRS.gov in their Forms and Publications section.
Try not to rush while filling out your paperwork – mistakes can result in more time and avoidable expenses.
Verify that your calculations and other information like your Social Security number are correct. Caution while doing your taxes the first time through makes it less likely that you’ll hear back from the IRS.
Get the fastest refund. By filing early, you’ll probably see that refund sooner. Filing electronically with direct deposit usually results in a refund faster than paper filing.
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More Tax Tips For Individuals

Whether you received a substantial tax refund last year or if you owed taxes instead, you might want to consider making some adjustments to your tax withholding. Penalties could result if you owed taxes at the end of 2015, for example, while if you received a significant refund you may have missed out on maximizing those funds throughout the entire year. Factors like getting married or divorced, a job change or a home purchase can mean changes to how taxes are calculated. Simply use the convenient withholding calculator at IRS.gov to find the correct tax withholding amount. Also, the worksheets included in Tax Publication 505, Tax Withholding and Estimated Tax can be used to make these calculations. If the results indicate you need to make adjustments, you may submit a W-4 Withholding Allowance Certificate, to your employer.

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Electric Vehicles/Plug-In Electric Vehicles (PEVs)

According to section 30D of the IRS tax code, electric vehicle owners receive a tax credit for qualified motor vehicles.

For electric cars and light trucks purchased after December 31, 2009, the applicable tax credit is equal to $2,500. An additional credit of $417 is available for electric vehicles that run on a battery with a minimum capacity of 5 kilowatt hours. Another credit of $417 is available for every hour of battery capacity over five kilowatt hours.

Filing Deadline and Payment Options

There are a number of options for last minute help with your taxes if you find yourself up against the filing deadline. If you need a tax form or tax publication, simply download what you need from the IRS Forms page under Tax Tools on our Chicagoland CPAs website. If you would like additional time to complete your returns, use Form 4868 to obtain a six month extension. For those having a difficult time paying a tax bill, there are a variety of payment plans.

Extensions do allow more time to submit paperwork to the IRS, but they do not allow for additional time to pay past due amounts. You must make an estimate of past due amounts at the time you submit an extension request.

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Incentives for College and Higher Education

For families or individuals who are paying off student loans or currently facing the cost of higher education, the tax code includes a number of tax incentives. For instance, you might be able to claim an American Opportunity Credit or Lifetime Learning Credit to pay the qualified tuition along with other costs of the eligible institution. Rules for each tax credit can vary and eligibility to make the claims gets phased out as income levels increase. For those that do not meet the criteria for these credits, it may still be possible to claim the tuition and fees deduction for some expenses. You can’t claim this deduction in the event your filing status is married but filing separately, or if another individual claims you as a dependent on their taxes. This deduction is not available at higher incomes.

Interest paid on qualified student loans is sometimes deductible. It can be claimed as an adjustment to your income, which means you will not have to itemize the deductions on Schedule A Form 1040. Like the other deductions mentioned here, it is not available at higher income levels.