Tax Returns and Deductions
Consider filing separate returns. If you are married, don't automatically assume that you will pay the least tax with a joint return. If you are a two-income family and one of you has high medical expenses, you may be able to save a substantial amount of money by filing separately. Always calculate it both ways and see which results in the least amount of taxes.
Shift income. If you receive investment income or you have a capital gain to declare, you may want to check out the rules on shifting or transferring some of the income or gain to your children. You may be able to save some taxes by having it taxed at their rate--probably 15 percent -- instead of your higher rate. Remember, honesty is the best policy.
Always take all the deductions you are legally allowed. Taking deductions that you are not entitled to can be very dangerous to your pocketbook. If you get audited down the road, you will owe the additional tax, penalties, and tons of interest. The audit could occur when you can least afford it.
Taxes can be complicated for everyone, so how do you know if you really need a professional tax preparer? Even if you use a professional, you're still responsible for making sure he or she has all the relevant information about your financial situation. On the next page, find out when you might need an accountant.