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Saving Money At Tax Time

Even if a paid professional prepares your taxes, you are responsible for what is reported on your forms. A common error is not giving your tax preparer enough information, and thus overpaying or underpaying your taxes because you signed a return with inaccurate numbers.

To get the most out of your relationship with a tax professional, take the time to tell your preparer abut your personal circumstances, especially if they have changed at all from the previous year (e.g., the birth of a child). You may be working with a new professional, who may not know your situation very well. Disclosure of updated personal or financial information is especially important if you have changed marital status or job status or if you have sold any investments.

Being unprepared can cause your tax preparation bill to significantly increase. Many professionals charge by the hour to prepare an income tax return. Thus, it is important to come to the initial meeting as prepared as you can, so that your tax return can be done as quickly as possible. Most tax preparers charge by the number of completed forms, so, you can save time and money by being prepared and organized. Add up your expenses in each category of tax deductions (e.g., charitable contributions) and total them. You may even save the emotional aggravation of looking for lost receipts and documentation to support your return if your records are organized.

If you are able to itemize deductions, make sure you do your homework to take advantage of every possible write-off. Computerized financial management programs, such as Quicken and Microsoft Money, can help in the organizational process. It's also important to familiarize yourself with available tax deductions and avoid common mistakes.

For example, when you make a one time charitable contribution of $250 or more, you need to get written confirmation from the organization acknowledging your gift. Make sure you understand IRS rules for making donations of property and required appraisals. IRS Publication 526, Charitable Contributions lists the rules for gifts of property.

Tax time does not necessarily have to be an unpleasant experience. By getting organized and prepared, as well as communicating with your tax professional about changes incurred over the last year, you may find that taxes are a little easier to handle. If you are organized and prepared, the only unpleasant task may be paying the bill--but hopefully, it will be as small as legally possible.