The IRS filing season statistics of 2020 shows people are slower to file their taxes. If you compare February 8, 2019, to February 7, 2020, fewer people have submitted their tax returns by -.04%. But in comparison with last year, more people are in a DIY state of mind since there has been an increase in online, self-prepared tax filings by 3.5%.
Out of the 2020 filers, the average return is $1,952. If you haven’t submitted your taxes yet and are looking for more information on how to maximize your return, we asked tax experts to share their expert tips for our readers.
Have a Checklist Ready
Whether you want to file your taxes yourself or you are getting a tax preparer, “it is always easier to fix a problem before you file your taxes than after,” explains Robert Allman, and Suzanne Vanzant from Professional Public Accountants. To prevent problems after you file, they recommend using a checklist of documents which they provided for us here:
- All W2s
- 1099s (If 1099 is from self-employment, then a list of income-related expenses)
- Brokerage Statements
- 1098T (Tuition Statements)
- Mortgage Interest Statement
- Property Taxes
- Medical Bills
- Any documents you receive with “Important Tax Information Enclosed”
Double Check Your Tax Documents
If you are going to file using tax software, Logan Allec, CPA and owner of the personal finance blog Money Done Right, says you should compare and double-check your documents. Allec tells us not to “blindly input the numbers on your form, take the extra five minutes to verify the amount on your W-2 by comparing it to your last paystub. If the amounts match, great. If not, bring it up with your employer. In the same way, be sure to verify the numbers on your other tax forms against your own records.” Taking this step can help avoid missing out on potential refund dollars or having to file for a correction later.
Don’t procrastinate. Waiting until the last minute is not how you make the most of your paycheck and future investments. Vincenzo Villamena, CPA and founder of Online Taxman says “a lot of people wait until post-Dec 31 to start thinking about their taxes, but at this point, the only thing they can do is contribute $5,500 to an IRA. If they planned ahead, they could potentially set up a solo 401k, an S Corp, or think about other expenses to deduct before year-end.” This type of planning could result in a bigger refund.
Take Advantage of Your Age
Eileen Maki, tax and accounting analyst at FitSmallBusiness.com, informs us of deductions to taxpayers over 50 years of age. Maki discloses, if you have “any type of retirement account, such as an IRA, it is eligible for both a tax deduction and the saver’s credit when making qualifying contributions. Deductions can equal up to $7,000 for taxpayers 50 or older, and the saver’s credit can give you up to $2,000 cashback on your return” if you file jointly. So go ahead and make those golden years work to your advantage.
Consider the Best Method for Your Needs
For Riley Adams, CPA, and Senior Financial Analyst for Google and writer at Young and The Invested, it is essential to understand that not every tax filer is the same. Adams recommends those earning under $66,000 to use free filing software. Free filing is available to qualified individuals by federal law at the Free File Alliance. They use the same software as all the name brands, so you are getting the same quality.
New Parents: Claim the Child Tax Credit
If you became a parent in 2019, Rey Pérez, from Edelman, says the child tax credit is one of the best tax breaks you can take advantage of to either reduce your tax bill or increase your refund. A parent can claim the child tax credit for up to $2,000 for each qualifying child. According to Pérez, “even if the baby was born just minutes before the end of 2019, the parents may still be able to get the full child tax credit.” For more information on the Child Tax Credit, you can visit the IRS website.
Married? Review Your Tax Filing Status Options
Whether you are a newlywed or married for years, Fred Amrein, founder and CEO of Pay For Ed, recommends you examine all the options for tax filing status. Amrein says, “a simple adjustment could result in monthly loan repayment reductions.” Most student loan borrowers pay their loans with an “income-driven repayment method.” The monthly amount is determined by your total adjusted gross income (AGI). Therefore, if you file your taxes jointly, your spouse’s income can influence how much you will be required to pay monthly. There can be a financial benefit to choosing to file jointly or separately, depending on your situation. The Department of Education recommends seeking out a tax professional to help you determine how to file if you have student loans.
Alexa Serrano, Banking, and Investment Editor at Finder.com advised filing early will avoid crowds at your accountants’ office. Serrano also warns of taxpayer identity theft which is when someone uses your personal information to file a tax refund and then collects that refund for themselves. Serrano also told us, “filing your taxes early will reduce your risk of tax return identity theft, tax deadline stress, and help get your tax refund faster.”
Trust the Experts
Robert Kerr, EA, Executive Vice President at the National Association of Enrolled Agents, says he understands people are trying to save a few dollars by preparing their own taxes. Kerr tells us that he also “understands why my mother cuts my father’s hair.” Kerr reiterates that saving money on haircuts is one thing, but when it comes to your taxes, you want to seek a tax professional. Tax professionals know about deductions or credits that affect your tax situation, meaning that the money you pay for the service can result in more money into your pocket after all.