Do you know that you can now file for your tax returns and have everything sent to IRS in just a matter of hours? Today, with the help of technology, it is possible to achieve such amazing filing speeds. To complete and send your tax returns as quickly as possible, you have to turn to the Internet. Here are some additional tips on how you can file for your tax returns efficiently.
1) Use a high speed connection with a modern browser.
To have a smooth sailing efiling process, try to use a reliable broadband connection. Avoid using connections that are shared by hundreds of other users. That may slow down the submission process. If your Internet connection is unreliable (disconnects often), there is a risk of losing data that you have just entered. For the same reason, also try to avoid using wireless Internet connections when you are efiling.
2) Make preparations and have all the necessary information ready.
Everything pertaining to your income should be accessible when you are efiling. You will find yourself referring to those figures again and again as you are efiling. It will be a frustrating and cumbersome experience if you efile halfway, and then find that you are missing some key numbers. If that's the case, all you can do is to save the efile as a draft, and return to it when you have the numbers.
3) Create your efile account as soon as you can.
The point of having an efiling account is to familiarize yourself with the efiling process. You don't actually have to go through the efiling yet. All you need is your SSN number, which will be used as your user name. You can also choose a preferred password. Use the same login information every time you want to work on your tax returns. Logging in multiple times will help you remember your password better.
4) Decide on the right forms to use as early as possible.
The shortest form to use, is the 1040EZ form (2 page long). Most people will be using this form, but it is only for income levels that are below 100k per annum. If your income level is above 100k per year, use the 1040 form.
If you pick the wrong form to use, you may be asked to file for your tax returns again. This may lead to delays in tax refund approvals.
eFiling is so quick and simple that as soon as you submit your efile, your tax returns can be processed in as soon as 7 days. That means you will receive your tax refunds faster than ever. The quickest way to receive refunds from IRS is through direct deposit. Make sure that you have a valid bank account. If not, the refunds will be sent to you by check.
As we approach Tax Season, I wonder how many people understand the potentially vast differences in the quality of tax return preparation? Are tax returns really the commodity that they seem to be? Is a tax return prepared by the tax service in the mall of the same quality as that prepared by a major CPA firm? What does it mean to have a "quality" tax return? In fact, can a tax return be prepared in such a way as to reduce income taxes?
As someone who has been involved in the tax return preparation process for almost 30 years, let me share some thoughts on this subject.
Accuracy in a tax return simply means that the information provided by the client was reflected on the tax return. It does not mean that the tax return was prepared in the BEST way it could have been prepared. In fact, I RARELY see a tax return from a new client that was prepared the way I would prepare it.
Let me give you some examples. Suppose you have some expenses that could either qualify as investment expenses or business expenses. Either classification would be "deductible" on the tax return. BUT, a business expense is MORE DEDUCTIBLE than an investment expense. How is that possible? An investment expense is deducted on Schedule A and is classified as a "Miscellaneous Itemized Deduction." There are several limitations on a miscellaneous itemized deduction. First, you only get to deduct these type of expenses to the extent they exceed 2% of your income. So, if you have $300,000 of income and $7,000 of investment expenses, you only get to deduct $1,000. What's worse is that if you are in the Alternative Minimum Tax like millions of taxpayers, you don't get any benefit for your investment expenses.
On the other hand, if you were able to deduct these same expense on your Schedule C or your Schedule E, you would be able to deduct 100% of the expenses. In addition, the expenses would reduce your self-employment income from your business. That's another 15.3% tax benefit on top of the income tax benefit.
Another example of less than stellar tax return preparation relates to depreciation. Depreciation is the government's gift back to investors, especially real estate investors, for investing in long-term assets such as equipment and buildings. What most tax preparers don't understand is the idea of a cost segregation or chattel appraisal. The whole goal with depreciation is to get more of it sooner. This provides the investor with a terrific tax benefit in the early years of property ownership. And under the important wealth creation principles of leverage and velocity, the sooner we have cash, the sooner we can invest it and obtain major returns from our investment. The problem appears to be a lack of knowledge from many tax preparers and CPAs about the rules surrounding cost segregation.
The one area where I do see mistakes relates to those taxpayers who file returns in multiple states. This is a specialty area of mine, which I teach at Arizona State University. Even in the major firms, there is a lack of understanding by the Federal tax departments of the many opportunities for tax savings when preparing multistate tax returns.
What it comes down to is whether your tax preparer/CPA has the knowledge and creativity necessary to prepare the BEST return possible. And is it worth it to you to pay a little more to get the better result? Are you focused on the amount you pay your advisors or are you focused on the return they provide you on your investment? Let me give you an example.
Suppose you have a choice of paying $750 for your tax return to a small CPA firm or $2,000 to an innovative, knowledgeable firm. All things being equal, anyone would choose to pay the lesser amount. But what if all things are not equal? What if the $750 gets you an adequate, accurate return but the $2,000 would get you a return where you pay $5,000 less in tax? Which is the better deal? In one, you are out $750 with no return on your investment. In the other, you are net ahead $3,000. Clearly, the $2,000 fee returns a greater value.
This tax season, review your own tax situation and the advice you are receiving from your tax preparer/CPA. Are you getting the return on investment you want? Are you getting the planning ideas you need? Are your taxes going down or do they continue to increase? Taxes are such a major part of your wealth creation that you cannot afford to ignore one of the most important part of the tax planning process - tax return preparation.
Both Gen Wright & Tom Wheelwright are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Gen Wright has sinced written about articles on various topics from Terrier Dogs, Acne Treatment and Lose Weight. Learn more about and how to efile your from Free1040t. Gen Wright's top article generates over 1220000 views. to your Favourites.
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