Tax time may not be popular but it’s unavoidable, and it’s certainly better if you don’t owe money! If you get money back, that’s a much more pleasant experience, but Josh Elledge of savingsangel.com says large refunds just aren’t a smart way to use your dollars.
“If you get a large refund all that means is you lent the government your money at zero interest for a full year,” Elledge said. “It’s not necessarily financially wise.”
Elledge has four things you should know to save money in taxes.
Filing the extension does not give more time to pay taxes--only more time to file returns. You still have to send in the estimated tax amount you owe by April 18th.
Claiming a home office is very strict--but don’t skip it if you truly qualify. Benefits include claiming 20% of deductible mortgage interest and real estate taxes, home maintenance, insurance and utilities.
Itemizing can be a waste of time unless you have a home office, large charitable deductions, large medical expenses and/or high mortgage interest and real estate taxes. To itemize your combined deductions need to exceed the standard deduction amounts every taxpayer is entitled to.
Filing early can help protect you from identity theft. A higher percentage of taxpayers are victims of tax return fraud. Thieves file very early using stolen social security numbers and birth dates and make off with refund money. Those committing tax fraud are rarely caught and clearing up the mess is the responsibility of the victim.
For more tax tips visit IRS.gov.