Tomorrow is Pi Day, an annual celebration on March 14 (3.14), the first three digits of Pi. This year, 2015, gives us the first five digits of Pi, 3.1415. If you really want to celebrate, gather at 9:26 and 53 seconds to celebrate the first ten digits.
In our own celebration of Pi Day, we offer you five ways to avoid mistakes and boost your tax refund, thus having your Pi and eating it too.
1. Claim all your dependents. Think outside the box on this one. If you provide more than half of your parents’ support and their income is under $3,950 each, then you can claim them as dependents on your tax return, even if they don’t live with you.
You also can claim an exemption for a relative whose income for the year was less than $3,950 and for whom you furnished over half of their support. If the person was a friend rather than a relative, they must have lived in your home for the entire year.
2. Claim the child care credit, if you qualify. Don’t just accept that child care is expensive and leave it at that. If you are working or actively seeking work and you pay child care for your dependent under age 13, you can claim the Child and Dependent Care Credit. This credit is a dollar for dollar reduction of your taxes, based on your child care expenses up to $3,000 for one child or $6,000 for two or more children. The credit ranges from 20 to 35 percent of your child-care expenses, depending on your income. Nursery school, private kindergarten, after school programs and day care are all qualifying expenses.
3. Deduct your tuition. Don’t overlook this important tax credit. Education expenses can be tax deductible if they maintain or improve skills required in your employment. Even if you are not going for a degree or taking classes to improve your job skills, you may still be able to take a deduction for college classes. The Lifetime Learning Credit is worth 20% of all your tuition expenses, up to $2,000 in tax credits, for you, your spouse, or on behalf of your child who is claimed as a dependent.
4. Save for retirement. The biggest mistake most of us make is not saving enough for retirement. Contribute all you can to your 401(k) plan or 403(b) plan at work. If you don’t have a retirement plan available to you, contribute $5,500 to an IRA (plus another $1,000 if you are 50 or older). You’ll save on your taxes now and benefit during your retirement years.
5. Can’t pay? File anyway. Don’t think you can escape penalties by not filing. If you don’t file, you’ll owe a 5% per month penalty for not filing.
If you owe taxes and can’t pay all the taxes you owe, file your tax return on time and pay as much as you can, then explore other payment options. Believe it or not, the IRS is willing to work with you to devise alternate payment options.
TurboTax will help you easily file your tax return and get all of the tax deductions and credits you deserve so that you can keep more of your hard-earned money.