By Amanda Ventura
This year, every American is getting an extra bonus on Tax Day. Time!
“Given how complicated the United States Tax Code is (over 70,000 pages), it’s no surprise many Americans make mistakes when preparing and/or filing their tax returns,” says Patrick Whelan, associate at The Frutkin Law Firm. “Even according to genius Albert Einstein, ‘the hardest thing in the world to understand is the income tax.’”
With Emancipation Day being celebrated on April 15, taxpayers have three extra days to file their return before Tax Day. Rather than using those precious days to procrastinate, give your tax process a spring cleaning.
April 16: Give yourself credit
People complain about how much taxes cost them, but Americans also tend to overpay to the tune of one billion dollars. One way to keep from contributing to the community chest is to be prepared to claim all tax credits available to you.
Word to the wise: An increasingly common, but misused, deduction comes in the form of claiming purchases for hobbies as business expenses.
“If you’re running a small business, you really need to have a legitimate business or home office to claim those expenses,” says Stephanie Fierro, partner at The Frutkin Law Firm. “I would love to be able to deduct my dry cleaning, but it’s not a legitimate deduction.”
To make the most of today, establish a way to organize these credits for next tax season.
April 17: Charity case
Arizona offers charitable tax credits as an incentive to donate to nonprofits that benefit lower income or disabled residents.
“The nice thing about a credit is that even if you donate $10, you get $10 back,” Fierro points out. “It’s a good way to reduce your tax liability and benefit a good cause. If you’re going to owe, you may as well take advantage of these things.”
To make the most of today, look at the Arizona Department of Revenue’s website for qualifying charities that resonate with you. In 2014, just over 100,000 Arizona residents claimed $28.2 million.
April 18: Shred fest
The second-most common legal trouble people get into with their taxes – after not filing – is forgetting to pay, says Fierro. Before you head to that fancy cross-cut shredder in your home office, keep in mind that the IRS has six years to investigate tax fraud on unreported income. If you’re bent on trashing your file cabinets today, try scanning them so they can be easily accessed, even beyond the six-year limit.
And, if you do procrastinate? You aren’t alone. The Internal Revenue Service reports that 20 percent of taxpayers wait until the last week to file. It also reported people who wait until the last minute to file taxes make more mistakes on their returns. A little due diligence can ensure that certain minor, but costly, mistakes don’t happen to you. In addition, tax software can be quite helpful in catching a number of careless mistakes for you, including problematic mathematical errors.