10 Surprising Tax Preparation Tips

Since tax time comes around every year, you might as well face up to it with a positive attitude. Think of doing your taxes like a scavenger hunt: You're going to seek out every deduction and tax credit you can find. And maybe, just maybe, this year your refund will allow you to take the vacation of a lifetime. ©iStock/Thinkstock

To help you win this year's tax-time scavenger hunt, we've compiled 10 tips and tax hints that may not have occurred to you. Some will need to be completed before the end of the tax year -- we've listed those first -- while others won't need to be addressed until you start getting ready to file.

Get Organized
Get a filing system in place at the beginning of the calendar year – and USE IT – to avoid scrambling at tax time. ©iStock/Thinkstock

OK, getting organized isn't really a surprise tip. But, what may be surprising is that if you use an accountant, it will cost you more money -- maybe a lot more -- if you're not organized. If you just dump a shoebox full of receipts on her desk and say, "Have at it," she's going to charge you for both the insult and the inconvenience.

Here are a few things you'll need to have on hand when you or your accountant does your taxes. Try keeping everything organized in one place as the year goes by. You'll be glad you did come April [sources: Rosen, Yochim].

  • W-2 and 1099 forms.
  • Documents related to other income.
  • Documents related to homebuyer or green energy tax credits, IRA contributions and mortgage and student loan interest.
  • Documents related to education, child care or adoption costs; charitable contributions; and business, medical, job-search and home office expenses.
  • Receipts for expenses such as repairs to rental property, gambling losses, last year's tax preparation fees and charitable work.
  • Documents related to personal events in your life, such as a marriage certificate, divorce decree or adoption papers.

Remember, being organized all year, no matter who does your taxes, can save you a lot of time -- and maybe money come April 15.

Free Tax Help
Tax assistance is standing by (if you qualify for help). © BernardaSv/iStockphoto

Believe it or not, the IRS offers free tax preparation help in cities and towns around the country to qualified taxpayers through its Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. The IRS works with community groups to train volunteers for both programs.

VITA generally offers free tax prep to both people who earn less than $52,000 per year and members of the military. TCE is designed for people aged 60 and older. TCE volunteers are trained to help with tax issues specific to this age group. Both programs also offer taxpayers free e-filing [source: IRS Tips]. Who knew the IRS offered anything for free? Almost makes it worth it to earn less money and grow older.

Medical Care
Depending on your situation, you might not have to pay a penalty, even if you don’t have health coverage. © stonerivermedia/iStockphoto

The Affordable Care Act requires you and everyone in your family to have qualifying health insurance, called minimum essential coverage. As an alternative, you can apply for and receive an exemption from the penalty for not having health insurance. You may qualify for an exemption for many reasons, including if you were uninsured for less than three months during the year, if your coverage would cost more than 8 percent of your household income or if you're a member of a federally recognized tribe, health care sharing ministry or religious sect that objects to insurance [source: HealthCare.gov].

If you don't qualify for an exemption, you will have to pay a penalty when filing a tax return. For 2014, the penalty, known as the individual shared responsibility payment, is generally the greater of 1 percent of your household income, or $95 per adult and $47.50 per child, with a per-family cap of $285 [source: IRS Affordable].

If you don't have health care coverage, visit HealthCare.gov to see whether you can either get it through the health insurance marketplace or qualify for one of the exemptions.

For Richer or Poorer
What couple DOESN’T dream of the day they can file taxes together? © omgimages/iStockphoto

Congratulations, same-sex couples! Thanks to a Supreme Court ruling in 2013, couples who have entered into a valid same-sex marriage must now file federal tax returns using either "married filing jointly" or "married filing separately" status. The ruling applies to couples who were married in a state that legally recognizes same-sex marriage, even if the couple lives in a state that does not [source: IRS Treasury].

Married same-sex couples will also be treated as legally married regarding other tax provisions such as estate and gift taxes. In addition, if you are part of a same-sex married couple, you may be able to amend previous years' tax returns to take advantage of this filing status. It might just result in a refund for you. As you're filing, keep a couple of things in mind. This ruling has nothing to do with state taxes, so if you live in a state that does not recognize your marriage, you will still have to file your state tax returns individually, and the ruling does not apply to domestic partnerships or civil unions.

Home Office Deduction
If you have a dedicated workspace at home that’s your primary place of business, rejoice! Claiming it as a deduction is easier than it used to be. ©Stockbyte/Thinkstock

If you've worked from home and tried to claim part of your house as an office in the past, you know what an enormous amount of paperwork it could involve. The IRS finally felt your pain and simplified the home office deduction in 2013.

Basically, you still have to meet two requirements. First, you must use a portion of your house regularly and exclusively for business. This means you can't shove the dinner dishes out of the way and use the dining table as your desk and then claim the dining room as your office. Second, the office must be your principal place of business.

If you meet these requirements, here's how to claim the deduction the easy way:

  • Use a standard deduction of $5 per square foot of space used for business, up to a max of 300 square feet (91 square meters).
  • Claim allowable itemized deductions, such as mortgage interest, utilities or real estate taxes on Schedule A.
  • Don't worry about the home depreciation deduction; it isn't allowed with the simplified option.

If you're a tax paperwork junkie, feel free to continue using the more complicated method. The IRS still allows it [source: IRS Home Office].

Maximize 401(K), Minimize FSA
If you have a flexible spending account for health care costs, you’ll lose the money you’ve set aside in it if you don’t spend it. ©Stockbyte/Thinkstock

If your company offers a 401(k) or similar retirement savings account, put as much money as you can into it, especially if your employer matches or contributes to the plan as well. Most contributions are made pretax, which means the IRS won't tax you on as much income. For most plans, you can modify your contributions at any time, so as it nears the end of each calendar year, check with your plan administrator to see if you've maxed out your contributions -- and if you haven't, do so. Maximum contributions vary depending on the type of plan and your age [source: IRS Retirement].

There is another workplace account, however, that you probably don't want to leave any money in at the end of the year: a medical flexible savings account (FSA). The Affordable Care Act lowered the annual contribution limit to this type of account to $2,500, so you may not have much or any left at year-end. Check with your administrator or review your account to be sure.

The U.S. Treasury has also changed the rules so that it's possible to carry over $500 to the next year, but your employer must sign up for this benefit. Again, check with your plan administrator. If yours is a use-it-or-lose-it account and you have money left at the end of the year, it will vanish into a stream of bureaucratic procedures, never to be seen again [source: Bell].

Give Generously
When you donate to a charity, make sure you get a receipt if you want to deduct that generosity at tax time. ©iStock/Thinkstock

As Santa's bells ring outside stores during the holidays, drop your change in the red bucket, and then consider other creative ways to make donations to charity that may also help lower your tax bill. Many organizations will take your old car, for example, often whether it runs or not. This way, you get an eyesore out of the yard while writing off the fair market value of said wreck.

You can also donate stocks or mutual funds if you have held them for more than one year. Look on this as a way to rebalance your portfolio by getting rid of investments that don't fit your goals -- and you won't have to pay capital gains taxes once the stocks or mutual funds appreciate either [source: Bell].

American Opportunity Tax Credit
The American Opportunity Tax Credit can help offset higher education costs. ©Wavebreak Media/Thinkstock

The name of this tax credit tells you nothing about it -- but at least it sounds super optimistic in the process. Specifically, the American Opportunity Tax Credit is for people who are paying for college -- up to four years of undergraduate study. The credit is scheduled to remain in effect through the 2017 tax year, and it allows you to claim a credit for eligible college expenses including tuition, fees and course materials up to $2,500.

Up to 40 percent of your cost is refundable -- even if you don't owe any taxes. And, it includes any education fees for the tax year, as well as those for the first three months of the next year if they are paid in the current year. So, if you've got education expenses coming due in January, February or March of next year, get out your checkbook before Dec. 31. It may help you save money on your taxes [source: Bell].

Medical Travel
If you or a dependent has to travel for medical treatment, that expense is tax deductible. ©iStock/Thinkstock

If you, or someone you're caring for and traveling with, travels out of town or makes a number of in-town trips for medical care, you may be able to write off the travel cost. Travel methods that are often deductible include car, bus, ambulance, airplane or rickshaw -- and even hotel rooms may be deductible. Keep your receipts, be sure to include parking costs and maintain a log of your mileage if you drive. The medical travel deduction can be made in addition to the medical care deduction you can claim if costs exceed 10 percent of your adjusted gross income [source: IRS].

Home Sweet Home
The interest you’re paying on your mortgage, as well as the cost of some home improvement projects, will help you out on your taxes. ©iStock/Thinkstock

All too often, a home feels like a giant vacuum that sucks up money. But come tax time, you can take advantage of a number of home ownership-related tax breaks that may help offset your Monster Vac.

Mortgage interest, including any points you paid if you bought or refinanced during the year, are deductible. Also, if you make your January mortgage payment in December, you can deduct that month's interest this year as well.

Upgrades, including green-energy improvements such as additional insulation, energy-efficient windows and whole house fans, often offer tax credits, which means the credit amount is deducted from the amount of taxes you owe. Get those improvements finished by Dec. 31 to claim the credit this year.


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Author's Note: 10 Surprising Tax Preparation Tips

As a small business owner who works from home, I was most surprised -- in a good way -- by the simplification of the home office tax deduction. For years I've struggled with how to figure out how much to deduct -- I'm a writer, not an accountant. That one change, though, makes me think I can maybe do my own taxes this year, with the help of an online program for guidance. If you're on the fence, take a look at new tax regulations and do a little bit of research up front. Maybe this is the year you can dive into the deep end of the tax pool on your own. I'll look for you there -- I'll be the one wearing the life preserver, just in case.

Related Articles


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  • HealthCare.gov. "Exemptions from the Fee for Not Having Health Coverage." (Nov. 12, 2014) https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/
  • Internal Revenue Service (IRS). "Affordable Care Act Tax Provisions for Individuals and Families." June 3, 2014. (Oct. 13, 2014) http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions-for-Individuals-and-Families
  • Internal Revenue Service (IRS). "Deducting Medical and Dental Expenses." Feb. 26, 2014. (Oct. 14, 2014) http://www.irs.gov/uac/Newsroom/Deducting-Medical-and-Dental-Expenses
  • Internal Revenue Service (IRS). "Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits." July 3, 2014. (Oct. 14, 2014) http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-401k-and-Profit-Sharing-Plan-Contribution-Limits
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  • Internal Revenue Service (IRS). "Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples." Aug. 29, 2013. (Oct. 14, 2014) http://www.irs.gov/uac/Newsroom/Treasury-and-IRS-Announce-That-All-Legal-Same-Sex-Marriages-Will-Be-Recognized-For-Federal-Tax-Purposes%3B-Ruling-Provides-Certainty,-Benefits-and-Protections-Under-Federal-Tax-Law-for-Same-Sex-Married-Couples
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