Monday, March 08, 2010

Tax Tips for Twentysomethings

The Illinois CPA Society has come up with six tax recommendations for younger filers: [1] take full advantage of available deductions and credits (such as the first-time homebuyer credit, child credit and lifetime learning credit). It is important to make sure that you have appropriate documentation, [2] e-file for faster refunds (but avoid like the plague any refund anticipation loans), [3] file a 1040A or 1040EZ rather than Form 1040 if you qualify and don't miss deductions or credits by doing so, [4] pencil in the work before filing to avoid errors (you don't want to hear from the IRS in July), [5] if you think that you might qualify for a deduction or credit but aren't sure how to get it, read IRS material such as form/schedule instructions or Publication 17 or sign up with a tax pro (such as an enrolled agent (EA) or certified public accountant (CPA)), [6] make sure that you acknowledge all income sources, especially if you receive Forms W-2 or 1099. Again, if you end up needing to file Forms C (business), F (farm) and/or SE (self-employment), it might well be time to sign up with a tax professional.

All the hints given by the Illinois CPAs are good, and not necessarily just for filers under 30. Two added things to consider: [1] schedule your W-4 to keep your refund low (the IRS gets your money free for more than a year in some cases if you have a large refund). If saving is hard for you, have your employer withhold a small amount each month to invest in a conservative mutual fund or savings account (most but not all will do this), [2] do not procrastinate. You get your refund faster and find professional help easier to get (and less grumpy) if you file by the middle of March.


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