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You've wisely decided to electronically prepare and file your taxes. This is a great move on your part as filing electronically increases the accuracy of your work and the efficiency with which your return will be processed, which means you'll get that refund sooner rather than later.
This page contains several Tips for How to Do Your Taxes Online to make the online filing and payment process even easier.
For a more complete overview, visit Mahalo's page on How to Do Your Taxes Online.
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Disclaimer
The content of this page is intended for general informational purposes only and is not a substitute for professional financial advice.Contact the IRS or a professional financial advisor for the most up-to-date and complete information regarding state and federal tax law.
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Tips for How to Do Your Taxes Online
- Understand the basic premise behind your tax return. Don't be intimidated by the idea of doing your taxes. You are essentially accounting for how much money you made in a year and subtracting any allowable deductions from that amount. The tax you owe is based on the resultant number. If you already had taxes withheld from your paycheck, you may not owe the government anything at all. They may owe you.
- File for free. If you made less than $54,000 in 2007, you qualify for the IRS' Free File program, a partnership between the IRS and commercial tax services like H&R Block and TaxACT, that allows you to file your federal tax return online for free.
- For more information, visit the IRS' Free File website or Mahalo's Guide to Filing Your Taxes Online for Free.
- Choose the best service for you. There are dozens of reputable online tax preparation services, and each offers different payment packages depending on how complicated your return is. If you are self-employed or have had any major life changes in the past year, you might consider a more expensive package that will walk you through itemizing your return to arrive at the greatest possible deduction.
- Start your research with the major tax prep sites H&R Block TaxCut, TurboTax and TaxACT.
- Organize your tax records before you begin. Before you sign-up with TurboTax or any other service, you should pull together all the documents you're going to need to fill out your return.
- Consult MSN Money's What You Really Need to Do Your Taxes for a complete list of all the paperwork you'll need to complete your tax return.
- Account for all of your income. You've added up your W-2s and 1099s, but don't forget tips, gambling winnings, jury duty pay, alimony received, fellowships and all the other different forms of income that must be accounted for on your tax return. See Tax Topic 400: Types of Income for additional information.
- Don't forget the most common tax credits. A tax credit is an adjustment you're allowed to make to your gross income whether you're itemizing your deductions or not. The most common tax credits include those for taking care of children under the age of 17, adopting a child and making energy savings to your home.
- Check out Yahoo! Personal Finance's list of the most Common Tax Credits for more information.
- Check out Yahoo! Personal Finance's list of the most Common Tax Credits for more information.
- Figure out whether you should itemize. The IRS lets everyone take a "standard" deduction from their yearly income to arrive at their "taxable income." Your tax is calculated on the basis of your "taxable income" so it stands to reason that you want to take as large a deduction as possible so that your "taxable income" and resultant "tax" is a smaller, rather than larger, figure. Sometimes, itemizing your deductions will allow you to subtract a larger amount from your yearly income than just taking the standard deduction would. What can you write-off as an itemized deduction? All kinds of things from education and business-related expenditures to medical costs.
- To figure out whether your standard or itemized deduction would be larger, consult an online calculator like TurboTax's Deduction Finder.
- Deduct charitable contributions. If you are itemizing your deductions, you can deduct charitable contributions from your tax bill. Your gift must meet certain criteria to be tax-deductible including its amount and the type of organization it was made to. You must have a written acknowledgment of the contribution from the organization to claim the deduction. Consult IRS Publication 526: Charitable Contributions for additional information, and fill out IRS Form Section A to claim the donation as a deduction.
- Deduct home office expenses. If you are self-employed, you might consider deducting your home office expenses. In order to claim these expenses, your business must meet an especially rigid set of criteria set out by the IRS. Consult IRS Publication 587: Business Use of Your Home for additional information. IRS Form 8829: Expenses for Business Use of Your Home to account for your home office use and expenses.
- Triple check your return. Even though you've prepared your return online, you should print it out and read through it carefully. You want your form to be complete and accurate cause nobody likes hearing from the IRS a few months later.
- Have your refund sent via Direct Deposit. If you are owed a refund, consider using Direct Deposit. By giving the IRS your bank routing and account number, your refund will be quickly and safely deposited into your checking or savings account. Why wait for a paper check if you don't have to?
- Get an extension. If you can't file your return by April 15th, get an extension. By filing IRS Form 4868, you are automatically granted a six month extension. You don't even have to tell them why you need it. Just file the form on time. Keep in mind, however, that this is an extension of time to file your return, not an extension of time to pay your taxes.
- Request an installment plan. If you owe more taxes than you can afford to pay, don't panic. Apply for an installment plan. You qualify for this plan if you don't owe more than $25,000 and are able to pay off your bill within five years. To apply for an Installment Agreement Request, you must fill out and submit Form 9465 .
- Avoid an audit. There's no way to guarantee that you won't be audited as a certain number of returns are chosen every year at random for the honor. However, you can avoid raising any red flags and be sure that any audit you are subjected to goes smoothly by not rushing when you do your return, staying honest, keeping good records and asking for help when you need it.
- Plan for next year. Get a jump on next year's taxes by filing your receipts in envelopes marked with the types of deductions people usually take—business meals, business travel, medical, etc. Consult MSN Money's "Putting the Envelope System to Work" article for more organizational tips.
- For more information, please see Mahalo's Guide to How to Do Your Taxes Online.
Tips for How to Do Taxes Online Questions
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Is 25% off offered by Fidelity, the best deal for TurboTax online? 1 AnswerI found a link where T.Rowe Price gives you a 35% discount: http://turbotax.intuit.com/microsite/home.jsp?priorityCode=3468339796 read more -
Whats the best online tax preparation software? 1 AnswerAccording to PC Magazine (January 2009)TurboTax Premier 2008 is the best online tax prep software with H&R Block TaxCut Premium Federal + State + E-File 200... read more -
What tips do you have for starting an online business? 1 AnswerI think its important when starting a business online to not disregard any of your ideas, cause at least they can help you to experiment with different methods ... read more -
Should I be keeping better records of my internet purchases for state sales tax purposes? 1 AnswerYes the revenue they are missing out on will be too tempting for state and probably the federal government to leave alone. read more
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