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If you’re doing it by hand (this year will be my 29th return filed using TurboTax, but I’ve read some people still use pen and paper) check your math. It’s easy to transpose numbers or make a simple arithmetic error. Don’t risk interest and penalty for such a simple error.

If you spent time volunteering, the time itself isn’t a deduction, but you may be able to take a deduction for the miles driven. A weekly round trip of 20 miles  can add up at the current rate of $0.14 per mile. If you already itemize, this adds a bit to your potential tax refund. Remember, any cash donations must be acknowledged by the charity in writing before you file your return.

If you have a deduction from your paycheck to a charity, don’t forget to include this. This is a valid tax deduction even though you may not receive a direct acknowledgement from the end charity. Your final pay stub for the year should show the total donation you’ve made.

You know that real estate tax is tax deductible, but don’t forget the tax you pay each year for your car or boat also counts as personal property tax. It may be a couple hundred dollars added to your tax deductions.

Did you refinance again in 2012? If you paid any points on the new loan, you can deduct the points over the life of the loan. The good news is that if you were taking the partial points deduction for the prior loan, you now get to deduct the balance. With how rates dropped to record lows last year, this affects many people who were serial refinancers.

Did you purchase stock in your company at a discount and then sell it for a gain in 2012? The cost listed may not be what you paid. That discount was included on your W2 as ordinary income and should be added to your cost basis when you sell. It’s common to buy stock at a 15% discount, so be careful to check your records, and not let yourself be taxed twice on that discount.

I can’t end a last minute article without mentioning IRAs. Nearly everything on your return has already happened, income, stock sales, 401(k) deposits, and so on. Dec 31st came and went. The IRA is one of the few exceptions to this rule, you can still deposit, until April 15th, up to $5000, or $6000 if you were 50 or older in 2012, and have it count for your 2012 return.

If you converted any IRA money to a Roth IRA, you may be able to still recharacterize any or all of that conversion back to the traditional IRA if you decide it will be in your best interest while reviewing your tax return. This is one of the rare chances at a financial “do-over” and can benefit you if the converted shares fell in value or if your marginal tax rate was higher than you anticipated.

Lastly, go online and prepare your tax return.  TurboTax will help you get all of the tax deductions and credits you’re eligible for and help you keep more of your hard-earned money.  You can e-file up until 11:59 on April 15th if you go online, but the sooner you finish the quicker you can get your tax refund.  If you still have questions, you can get your questions answered by TurboTax tax experts who are CPAs, IRS enrolled agents, and tax attorneys, free.

If all else fails, you can file for an extension with TurboTax Easy Extension. This doesn’t buy you time to pay your tax bill, just some extra time to get your paperwork together. You’ll want to take what information you have and make the best estimation of what you’ll owe and send it with the extension request.

Comment and let me know if I helped you catch a potential mistake or oversight on you return.

Above all else, try to come up with a plan for the tax refund money before you even receive it. One of the worst things that can happen is you don’t have a specific goal in place for the money and it just gets deposited into your checking account.

It sits there and slowly, day by day, you chip away at the money without even realizing it. A few months later it’s gone and you’re not even sure where it went. So, don’t let this happen to you and come up with a use for the money before you have a chance to spend it.

Knock Down Debt

If I told you about an investment that had a guaranteed return of 15-30 percent or more, you’d probably view that as a little pot of gold and would like to invest, right? Well, if you carry a balance on a credit card, you can achieve these rates of return easily.

Most credit cards have an annual rate of anywhere from around 12 percent all the way up to 30 in some cases. Any balance you leave on that card will rack up those finance charges. For example, carrying a $2,500 balance on a card with a 25% APR will cost you $625 in interest a year!

That’s a lot of money being spent on nothing but the privilege of using a credit card and not paying it off right away. So, if you’re getting a tax refund this year and you’re carrying any high-interest credit card debt, one of the best things you can do is to use it to pay down the debt. It’s the easiest way to generate your own personal pot of gold even if you don’t see the total benefit immediately.

Padding Your Golden Years

What if you don’t carry credit card debt? There are still a few good uses for that tax refund. Chances are you haven’t been maxing out your IRA or 401k, and that’s OK. It’s difficult to fully fund these accounts with so many other financial obligations, but it’s something that should not be overlooked or pushed to the back burner just because retirement may be a few decades away.

If there’s tax refund money coming your way, consider dumping it right into an IRA or bump up your 401k contribution at work to make up for the extra money. If you thought paying off a credit card with a tax refund provided a good rate of return, you haven’t seen anything yet. Take that $2,500 tax refund and stick it into your retirement account. Even if you only see a modest return of around 5 percent a year, this year’s tax return would turn into a $8,500 pot of gold in about 25 years.

That may not seem like a lot, but what happens if you take your $2,500 tax refund each year and do the same thing? Now you’re thinking. If you did this, in 25 years your pot of retirement gold would be over $130,000. Think about that for a minute. All you’re doing is taking your tax refund money, that typically gets spent on odds and ends, and significantly padding your nest egg with virtually no effort.

Have a Little Fun

Paying down debt, saving for retirement, or building an emergency fund are not exactly the most exciting things to do with your tax refund money, but the results over time are more than worth it. If your financial house is pretty much in order already, then having a little fun with the money isn’t a bad idea if done right.

Instead of blowing it on a new laptop, television, or other gadget that will be thrown to the curb in a few years, think about long-lasting lifestyle upgrades like making sensible home improvements, which will not only provide enjoyment while you’re living there, but can increase the value of your home, which can put more money in your pocket when it’s time to sell.

Haven’t Filed?  You Can Still File so You Can Get Your Pot of Gold

If you haven’t filed your taxes yet you can still file so you can get your tax refund.  TurboTax will help you get the tax deductions and credits you deserve and help you keep more of your hard-earned money and turn it into a pot of gold.

In most cases, refunds go unclaimed because taxpayers who don’t make a lot of money and may not meet the IRS requirement to file a tax return are actually entitled to a tax refund, but since they never file a return, they can’t claim that money. Another tax break that taxpayers miss is the Earned Income Tax Credit, or EITC. This is a tax credit, not deduction, that’s available to many lower-income taxpayers, and this credit often goes unclaimed.

If this sounds like you, it’s time to get to work so can you claim what’s rightfully yours this tax season and even for previous tax seasons. One thing to keep in mind is the IRS places just a three year window on claiming these past refunds. After that time elapses, the money goes to the U.S. Treasury. You’ll also want to note that if you want to claim a refund from two or three years ago, you’ll likely need to make sure all subsequent year tax returns have been filed in order for the funds to be released.

Unfortunately, if you’re thinking about claiming a potential refund that may be a few years old, that can be troublesome if you haven’t kept good records. As you know, preparing a tax return takes a little time and usually requires some documentation that records your income and taxes paid throughout the year, so coming up with W-2 and 1099 forms a few years after the fact may be an issue.

This is why it’s important to keep all tax-related documents in a safe place for at least 3-7 years. So, check your file cabinets and dig through the box of papers in the closet to see if you can come up with what you need. If you can’t, the next step would be to contact your employer at the time in question and request copies of the forms. If these efforts are unsuccessful, you can get a free transcript showing information from these year-end documents by ordering it on IRS.gov, filing Form 4506-T, or by calling 800-908-9946.

Keep in mind, the average unclaimed tax refund is over $600. So, think about your situation and decide if doing a little legwork to track down documentation and filing old tax returns is worth it.  Also, don’t miss out on your tax refund for the present tax year.  TurboTax can help you easily file your taxes for this tax year as well as previous tax years.

Setting aside a small amount of money in a safe place allows people to manage unexpected events, opens up opportunities for education and helps families build future financial security.

Tax time is the ideal time to think about saving. Lower-income families, especially those eligible for tax credits, can receive tax refunds that amount to as much as 20% of their annual incomes.  For many, tax time is the only time all year that they can save money.

“Buying a U.S. Savings Bond with your tax refund is an easy way to start saving”, said Bernie McKay, director of The American Tax & Financial Center at TurboTax. “You only need $50 to get started and you’ll earn interest so your money starts growing immediately. Tax time is the perfect time to get your financial house in order and  jumpstart saving for the future for you and the people you care about.”

Why Series I Bonds?

U.S. Savings Bonds are a simple and versatile savings opportunity for average American working families.

Sold in denominations of as little as $50, Series I bonds, the type available for purchase through TurboTax, are available to every taxpayer who receives at least $50 in tax refunds. Taxpayers can use a portion of their tax refund to buy bonds and have the remainder deposited into a bank account or pre-paid debit card.

Savings bonds can be purchased as gifts for others, and many purchasers save for their children’s education.

SaveYourRefund Sweepstakes

The SaveYourRefund Sweepstakes makes taxpayers a winner this tax season with chances to win $250 in weekly drawings or a grand prize of $25,000 by saving just $50 of their federal refund! Beginning February 1, 2013 and running through April 15th, 2013, all U.S. Citizens and legal residents over age 18 that are due a federal tax refund can save a portion of that refund using IRS Form 8888 and enter the sweepstakes.

The Sweepstakes, offered through Doorway2Dreams, a non-profit organization committed to improving the financial lives of Americans. will award multiple weekly prizes of $250 and all entrants will be eligible for a chance at winning the $25,000 Grand Prize. Visit http://www.SaveYourRefund.com to submit your entry.

Everyone at TurboTax is proud to help our customers and their families save for their futures. In fact, TurboTax has been a significant contributor to tax-time savings. Over the past three years, more than 75,000 tax filers have purchased U.S. Savings Bonds and accumulated more than $40 million for themselves and their loved ones.

1. E-file your tax return – Congratulations on finishing taxes, the hard part is over! Now you just have to sit tight and count the days until you receive your refund.
2. Check the status of your e-filed return – Approximately 24-48 hours after you have e-filed your tax return, you will receive an email from the IRS letting you know that your tax return has been accepted!  If your return was not accepted, visit this FAQ.  If for some reason you do not receive an email, you can check the status of your e-filed return here.
3. Start tracking your refund –  About 24-48 hours after the IRS accepts your tax return, you can start tracking your refund. The IRS expects to issue more than 9 out of 10 refunds in less than 21 days upon acceptance.  You can track your refund at the IRS Where’s My Refund tool or by logging into your MyTurboTax account.
4. Your tax refund is here – If you chose direct deposit when you filed your return, you’ll need to allow 1-2 business days for your bank or financial institution to process it and have it available for you once the IRS has released it. If you didn’t choose direct deposit, the IRS will mail you your tax refund check, which could take 6-8 weeks.

Of course times may vary based on your situation.  Click here to see a list of tax forms that the IRS is not accepting yet.

Last updated 2/15

Congratulations on finishing your taxes!

We know how important your tax refund is to you. Good news, the IRS started processing tax returns on January 30th.   Returns will be processed in the order they were submitted and as soon as your tax return is accepted, we will notify you by email.   This notification could take up to 48 hours.

The IRS estimates that you should receive your tax refund within 21 days of your return being accepted.  The IRS issued more than 9 out of 10 refunds in less than 21 days last year and expects the same results this year.

Once your tax return has been accepted by the IRS, you can track the status of your refund by logging into your MyTurboTax account or checking the IRS Where’s My Refund Tool.

IRS Update:  The IRS announced today that they are experiencing high traffic on their Where’s My Refund Tool.  As a result, there may be limited availability during busier periods. The IRS has asked the entire tax industry to remind customers to only check Where’s My Refund once a day. IRS systems are only updated once a day, usually overnight.

Tax Deadline

When is Your Extended Tax Return Due?

Your timely filed extension changes your deadline to file from April 17 to October 15.  Of course, this six month delay assumes you paid any tax you owed back in April. As the saying goes, an extension of time to file is not an extension of time to pay your tax.

How Do You File a Tax Return You Previously Extended?

To file an extended tax return, simply gather and enter the information from your W-2s, 1099s, and tax documents.  TurboTax will ask you the necessary questions to enter the appropriate information from your documents and help you complete your tax return.

What Should I Do If I Didn’t File a Tax Extension?

If you missed the tax filing deadline and the deadline to file an extension in April, you should still file your tax return as soon as possible.  You may be missing out on your big tax refund and if you owe money you will continue to incur penalties and interest until you file your tax return.

Need More Time?

Years ago, filing an extension provided the filer with four additional months to file his or her return, until August 15.  Back then, you could apply for an additional two-month extension if you needed it.  While that second extension wasn’t technically automatic, it was nearly so.  These days you automatically get the additional six months from the get-go.  On the other hand, that means no additional extensions are available so make sure you file your tax return by October 15.

Saving Tips

After you file your tax return, it’s a good time to step back and consider your options. Your tax filing provides you with an opportunity to reflect on your financial situation, and decide what moves you can make going forward.

First Things First: Consider Adjusting Your Withholding

Once your taxes are filed, and you know how much money you owe, or how much money the government owes you, it’s the perfect time to evaluate your income tax withholding. If you have a huge refund, you might consider reducing your withholding by filling out a new Form W4. That way, you have more money each month to use to your advantage, rather than simply giving an interest-free loan to the government. While it might be nice to get a fat refund check, the reality is that you are simply giving your money away to the government. Forced savings is better than no savings, but discipline will trump all that.

If you underpaid by quite a bit, you might consider increasing your withholding so you don’t owe as much next year. While it’s not terrible to owe at tax time, if you owe too much, the IRS will assess penalties and take even more of your hard earned cash. Planning to owe is a fine line to walk, and it’s one to consider carefully. If you are self-employed, and you owe quite a bit, increase what you pay each quarter so that you don’t as much next year.

Smart Moves for Your Tax Refund

If you are receiving a tax refund, you need to figure out what you will do with the money. Some of the smartest things you can do with your tax refund include:

1. Pay down high-interest debt – If you have high interest debt, such as credit card debt, you should make it a priority to pay some of it down with your tax refund. High interest debt is like an anchor on your finances, help yourself out by paying it down as much as you can afford.
2. Increase your retirement account contributions – Saving for retirement should be second on your list, behind paying down debt. Make a contribution to your Roth IRA or IRA, increase your contributions to 401(k), or simply put a little extra away in a savings account. You won’t see the benefits of these savings for many years but the earlier you start, the better.
3. Contribution to a Health Savings Account – An HSA, if you are eligible, is a great way to save for your future medical costs. While it’s not a priority, like the first two are priorities, it is smart and something to consider if you are eligible.
4. Use some of the money to start a passive income stream/invest – If you’re fortunate enough to have avoided debt, juiced up your retirement accounts, start looking at ways to invest those funds to create an income stream for the future.
5. Make home improvements that can add to the value of your home – This one falls into the category of treating yourself while doing something financially smart. If there have been some home improvements you’ve had your eye on, like redoing your kitchen or bathroom, take some of the cash to do the job. It’ll improve your enjoyment of your home plus increase it’s value.
6. Take a vacation – Finally, try to enjoy some of it. If you’re responsible enough to pay down some debt, increase retirement savings, and do all of the other responsible things on this list, take some of the cash and enjoy it. Take a vacation, buy something you’ve had your eye on, and live life. Think of it as an investment in yourself. You know what they say about all work and no play!

Consider How to Pay What You Owe

Many people find that they are unable to pay their taxes. Once you file, it’s important to figure out how you discharge your obligation. The good news is that the IRS and most state governments offer payment plans. This can make it more affordable for you to pay what you owe. If you find yourself overwhelmed, the smart play is to set up an installment plan. You’ll pay interest, but it’s usually a better option than being charged fees due to late payments or paying high interest by putting it on a credit card or taking a payday loan.

Prepare for Next Year

Once you are squared away with this year’s taxes, the smart move is to prepare for next year. Plan ahead for specific spending that can result in a deduction, or a tax credit. You should also consider organizing your finances so that you are keeping track of your tax-related receipts throughout the year. This will help you minimize your tax liability and help you avoid the last-minute rush each year.

Interactive by joshritchie

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Here are five intriguing possibilities for passing the time:

Last-Minute Tax Prep

Source

Unfortunately, for some of us, the extra two days of filing time will be used finishing your tax return that would’ve been late under the normal deadline.

If this is you, don’t be too hard on yourself. It would have been preferable to finish early (and have the options below at your disposal) but instead of dwelling on leisure time lost, see these extra two days as your “get out of jail free” card—a rare opportunity to get away with waiting until the last minute.  Plus, preparing your taxes with TurboTax is easy even if you do wait until the last minute.

Spending Your Refund

Source

Those of you who did file early have something even sweeter than a two-day break: your refund check! Whether this year’s refund was $200 or $2,000, all that matters now is how you will spend it. The possibilities are endless and vary based on your priorities for the money. Are you behind on debt, and looking to chip away at the barriers holding you back from financial freedom? This weekend is the perfect time to sit down and pay some long-overdue bills.

Or, are you all caught up financially, but dying to make a long-delayed “impulse purchase?” Maybe it’s a new TV, or some new threads for your wardrobe. Whatever the case may be, this is the time to indulge—you’ve earned it! Use this weekend to invest your refund check wherever it will provide the best return.

Purposeful Relaxation

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Nearly all of us are guilty of putting relaxation on the back burner. In the rush to get all our ducks in a row, we push ourselves relentlessly, treating as luxuries such basic necessities as restful sleep or time to unwind. Yet, in the process, we deprive ourselves of the opportunity to recharge, to unburden ourselves from the many stressors, obligations, and worries that fill our minds and simply “be.”

Far-fetched or unnecessary as it may seem, research shows that relaxation is actually essential to well being. In addition to our work capabilities, we are also emotional and curious beings with needs that stretch far beyond productivity. To that end, spend your two free days immersed in relaxation: visit a day spa, get a massage, or simply sprawl out on the couch and enjoy an engrossing movie. Your mind and body will thank you for it.

Taking a Weekend Road Trip

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As humans, we are creatures of habit. We take comfort in familiar surroundings, routines, and activities that give structure and meaning to each day. Yet, at a certain point, habit begins to harm us rather than help. If we never push beyond our comfort zones or expose ourselves to any new experiences, our brains start to stagnate, becoming mired in the apathy and boredom that mind-numbing predictability creates. To dig ourselves out, we need a potent dose of the unfamiliar.

Now, we’re not saying the 9-5 office worker needs to reinvent himself as a starving artist. It can be a much smaller change: like taking a weekend road trip. With the extra two days this year’s tax deadline affords you, why not venture out onto the open road? Visit a popular landmark in the next state over. Travel to a town you’ve never seen before, and eat at one of the restaurants. The simple act of seeing and experiencing something new will stir the neurons in your brain like nothing at home will.

Resurrecting a Neglected Hobby

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In the noisy chaos of daily life, nothing feels less important than our hobbies. No one nags you about not practicing your guitar often enough, or failing to hike as frequently as possible. And of course, it’s good to be on top of the things that matter in your professional life. But it’s when you ignore your hobbies too much, that you’ve become a workaholic, and must get back in touch. The world is perfectly happy to let you bury your passion beneath its demands. If you want to avoid feeling like a lifeless automaton (productive but totally lacking in the soul-stirring excitement that makes life worth living) you need to actively and zealously make time for your passions.

Now is a perfect time to start. With two free days at your disposal, resolve to guiltlessly resurrect a hobby you’ve been sacrificing. And don’t just pick up your instrument or head to the batting cages: do it with gusto and enthusiasm, remembering that these activities supply your zest for living.

Interactive by joshritchie

How will you spend your tax refund this year?

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The IRS has updated it’s Where’s My Refund site with additional FAQs: http://www.irs.gov/newsroom/article/0,,id=254102,00.html

Some taxpayers who filed electronically and received an acknowledgement from the IRS are concerned when they visit “Where’s My Refund” and are told that IRS has no information regarding their tax return. The IRS informed us on February 10 that this is a temporary situation and should be resolved in several days.  At that time, you will be able to get an expected refund date when you visit “Where’s My Refund.”

This is an IRS issue and impacts returns regardless of who sends them in
to the IRS. This is not a TurboTax issue.

If you have received an acknowledgment of your tax return from the IRS, then the IRS assures us they have received your return and are processing it.

Information on the status of your refund will be updated in “Where’s My
Refund” once your return processes. This is a temporary situation, and we expect to resolve the matter in a few days.

IRS expects the vast majority of tax refunds to continue to be issued
within the historical range of 10 to 21 days.

We want to quickly share any updates we receive through IRS because we know many of you are still waiting for  your refund status and estimated direct deposit date.  We really appreciate your patience in this really frustrating time and we’ll continue to provide updates as we receive them from IRS.

So you filed your 2010 tax return and now your wondering, “Dude, Where’s My Refund?“  Possibly, your tax refund is one of the checks out of $153 million in undeliverable tax refund checks just announced by the IRS, with an average refund  totaling $1,547 this year!

Undeliverable Tax Refunds

Only a small percentage of checks mailed out by the IRS were returned as undeliverable, but 99,123 taxpayers’ 2010 tax refunds could not be delivered because of mailing address errors.  With Christmas coming soon and the tough economy, you need your money as soon as possible.  So how can you track your tax refund and how can you avoid this problem in the future?

How to Track Your Undeliverable Refund?

If you believe your tax refund may have been returned to the IRS as undeliverable:

• Use the IRS “Where’s My Refund?” tool.  The tool will provide you with the status and, in some cases, may give you instructions on how to resolve delivery problems.
• Call the telephone version of “Where’s My Refund?” at 1-800-829-1954

How Can You Avoid Undeliverable Tax Refunds In the Future?

Here are steps to take to ensure you receive your 2011 tax refund:

• E-file your return – E-filing with tax software like TurboTax eliminates the risk of lost papers and errors.  When you paper file there is no way to verify when, and if, your tax return is received or whether or not your tax return has errors.  When you e-file, you receive confirmation from the IRS that your tax return is received and accepted.  The IRS also recommends that you file your tax return electronically and supports tax software like TurboTax.
• Direct Deposit your Refund Check – Last year, more than 78.4 million taxpayers chose to have their refund checks deposited directly into their bank accounts.  TurboTax gives you the option to deposit your tax refund directly into your bank account or you can request to have your tax refund placed directly on the TurboTax Refund Card.

The combination of e-file and direct deposit is the best option to avoid undeliverable tax refund checks and TurboTax makes it easy!

Nearly 8 out of 10 taxpayers chose to e-file for tax year 2010 and that number is expected to increase for tax year 2011, so what are you waiting for?  Make your plans to e-file and use direct deposit for tax year 2011.

Most unclaimed tax refunds belong to people who did not make much money during the year, and therefore are not required to file a tax return. That’s right, the IRS actually tells you that if you make below a certain amount each year, you don’t have to file a return. But that’s usually a mistake. Just because you don’t have to doesn’t mean you shouldn’t. Even though you didn’t make a lot of money you still probably had taxes deducted from your paychecks. With various tax credits and deductions, you could certainly get some of that back, but you have to file a return in order to be eligible for the refund.

The other big reason that tax refunds go unclaimed has to do with tax credits. There are a number of tax credits out there, but the biggest, most overlooked tax credits are the refundable Earned Income Tax Credit (EITC) and various economic stimulus credits that have been issued in recent years. Sometimes filers do their tax return and submit it on time, but miss out on these tax credits. It is up to you to claim them. It isn’t something the government will catch and gladly send you a check for.  Want to see if you’re eligible for the Earned Income Tax Credit?  Try the TurboTax EITC Calculator.  The calculator is updated every tax season due to tax law changes, but you can still get an idea if you are eligible for the Earned Income Tax Credit even if you are estimating a prior year.

So, how do you determine if you are owed money and how can you go about requesting it? First, in order to collect a refund, a tax return must be filed with the IRS no later than three years from the due date of the return. After that, the money gets absorbed by the treasury, so you should stay on top of it. There is no penalty for filing a late return if you qualify for a refund.  You will also need to have your tax documents, namely your W-2s. If it has been a while, it may mean contacting your employer and getting new copies. Once you have the supporting documentation, you can go ahead and complete those past tax returns.

There is a catch. You have to be caught up on your taxes in the years following the year you’re requesting the refund. For example, if you’re trying to get money back from your 2009 tax return, you will have to make sure you’re squared away with 2010 first.

If you think you may be one of the millions of tax filers who could have some money waiting for you at the IRS, now is the time to start thinking about going after it. If you made money in the past few years but didn’t make enough to be required to file, it’s a no-brainer.  You should think about getting those past returns filed. If you already filed your previous tax returns, it would be a good idea to dust them off and look through them to make sure you took advantage of the EITC (if you qualified), the Making Work Pay Credit, and any others. Sure, it may only be a few hundred dollars, but why not get your hands on it if you’re entitled to it?  TurboTax will guide you through tax deductions and credits so that you don’t miss out on any of your refund.

The tax law requires your employer to withhold federal income tax from each paycheck you receive and send it to the IRS on a quarterly basis. If you are self-employed, you are required to make income tax payments every three months throughout the year. At the end of the year, your employer provides you with a W-2 statement that reports the total amount of tax you paid during the year. When you prepare your tax return and the amount you owe is less than the total amount withheld, the IRS will refund the difference to you.

Filing exempt from withholding

When you start a job, your employer will ask you to fill out IRS Form W-4. The W-4 estimates the amount that should be withheld from each paycheck based on the tax information you provide. To claim an exemption from withholding, you must meet certain criteria. If you had even $1 of tax liability in the prior year or anticipate earning income in excess of the sum of your standard deduction and exemption, you cannot be exempt from federal tax withholding in the current year. For example, if you file as single for 2010 you must not anticipate earning income in excess of $9,350. This is a combination of your standard deduction of $5,700 and your personal exemption of $3,650. If you still file exempt and earn income in excess of this amount, unless you qualify for a refundable tax credit, it is impossible for you to receive a refund since no federal income tax is taken from your paycheck.

Claiming allowances on the W-4

If you are unable to claim exempt from withholding, you can still reduce the amount that is withheld from each paycheck by claiming allowances on your W-4. The more deductions you anticipate claiming at the end of the year, the more allowances you can take. These allowances are based on your filing status, the number of dependents you claim plus the itemized deductions you anticipate claiming such as mortgage interest, state property taxes and medical expenses. However, the IRS will impose penalties on you if you significantly underpay your actual tax liability due to filing exempt or claiming too many allowances.

Refundable tax credits

A refundable tax credit means that even if you have a zero tax liability before claiming the credit, you can still obtain a refund for a portion of the credit. For example, the American opportunity credit that covers certain higher educational expenses is 40 percent refundable. Therefore, if you qualify for the maximum $2,500 credit, you will get a refund of $1,000 (40 percent of $2,500) even if you paid no income tax for the year.

Free Tax Filing, Efile Taxes, Income Tax Returns – TurboTax.com

Many times, simply avoiding a higher-cost expense is the solution to getting your spending budget back under control.  But most people can’t suddenly stop driving—they need to drive just to get to work.  Quitting your job in order to save on gas is obviously not the answer.  Fortunately, you don’t have to go right to the life changes that might make you miserable to reduce the rest of your spending.   First, start with these five quick tips, each of which can help you spend less with minimal pain.

Tip # 1: Read ebooks—at the library

You’re a voracious, motivated, and tech-savvy reader. (Why else are you here?)  Your local library might just have an e-library. If they do, borrow the ebooks you want and save. No reading device yet? Increasingly, libraries are lending Amazon Kindles.

Tip # 2: Combine trips

Combining two or more car trips into one won’t just save you gas money, it will also save you time.  Consequently, I am a big fan of this tip no matter the price of gasoline.  If you need to get to the grocery store and the warehouse club—just a mile further down the road—visit both, one right after the other.  Add a third or fourth destination (maybe even the library?) at the same time to really take advantage. Driving for volunteer work? Don’t forget, you can often deduct mileage driven to and from it on your tax return. Save those receipts!

Tip # 3: Negotiate your cable, phone, and Internet bill(s)

With increasing competition between phone, cable, and satellite companies, the bargaining position between you and the utilities has changed dramatically over the last several years.  To take advantage, however, you must initiate the dialogue.  Why pay more for the same?  Cut your bill immediately by calling at least two providers to get the best deal. Don’t be afraid to play them off each other.

Tip # 4: Look at how much you’re paying for insurance

You’ll never impress anyone with expensive insurance premiums.  If it’s been more than a couple of years since you requested alternative companies quote on your car insurance, it’s time to make a few phone calls.  Don’t be surprised if you can save a few hundred dollars per year.  Also, don’t forget to ask about association or other discounts available to you.

Tip # 5: Use your points

You’ve earned all of those hotel or frequent flyer points.  Trust me—using them is much more fun than earning them.  Although redeeming airline points for free flights isn’t the most straightforward exercise, a couple of hours and some flexibility could easily save you $300, $400, or much more on a ticket.  When cash is tight, using alternative currency (your points) is a particularly great way to go . . . away.