File Tax Returns from Home

As tax season heats up, many folks in the Miss-Lou will look for help filing their returns. But instead of shelling out big bucks for a certified public accountant, do-it-yourself taxpayers can avoid the CPAs if they just follow a few basic instructions.

A majority of tax payers in the Miss-Lou have pretty straight-forward circumstances that allow them to be able to handle their taxes themselves, said Charles Caldwell, managing partner at Silas Simmons.

“Plenty of folks could do it themselves, and that’s what I would encourage them to do,” Caldwell said. “It varies according to the tax payer and what they understand.”

The first step is always to gather your information, Caldwell said.

“You have to organize your information and make sure you have all the documents together,” he said. “They need documentation for any deductions they plan on taking, and that applies if they are having it done by a professional or on their own.”

This includes proof of income, receipts and state and federal tax forms.

The Internet has become a very useful tool for anyone that wants to do their own return, Caldwell said.

“There are certainly software programs available that can help people,” he said. “If your return is pretty straight-forward, it will work pretty well.”

Caldwell also recommends the IRS website that has a lot of useful information along with links to various free e-filing websites.

Online resources and free e-filing have become popular tools, and Vickie Johnson, who coordinates the Volunteer Income Tax Assistance program in Concordia Parish, said most of these online sites are easy to use.

“If they are knowledgeable as far as their income and basic computer (skills), it is simple,” Johnson said.

VITA offers a free service that helps people file their taxes. The program provides a free alternative for people who need help with filing.

“What we do is help them when they can’t do it at home,” Johnson said. “We are a volunteer tax preparation that is trained by the IRS to be able to do this.”

The websites provide step-by-step guidelines to file, and if the person has the right documentation the process is simple, Johnson said.

Online filing is also available for state returns in Mississippi and Louisiana.

Caldwell said the biggest issue he runs into on individual returns is people missing out on potential deductions.

“We see people that have missed deductions and missed opportunities,” he said.

The IRS has a list of itemized deductions on its website for people to examine before filing a return on their own.

People with questions on deductions, but still wanting to file their taxes for free can use the VITA program. If they bring in all their documentation, a volunteer like Johnson will help them file at no cost. Free-tax assist day at the Vidalia branch is Feb. 19 and March 19. At the Ferriday branch, it is March 5. Interested taxpayers need to bring ID, Social Security card, and birth certificates for children, income statements and last year’s returns. A similar program is offered every Wednesday until April 15 at Armstrong Library in Natchez.

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Why You Should Hire a Tax Preparer

The U.S. tax code grows more complicated every year and currently spans thousands of pages – even government experts can’t agree exactly how long it is. So it’s not surprising that millions of Americans hire professional tax preparers to complete their returns.

Relinquishing the onerous task of calculating your taxes to a professional may save you time and give peace of mind – they know more about tax law than you do, right? But remember: You’re still legally responsible for all information on the return. So if the preparer makes a mistake or intentionally defrauds the government, you’ll be on the hook for any additional taxes, interest and penalties – even possible prosecution.

The IRS notes that although most tax return preparers are professional, honest and serve their clients well, taxpayers should use the same standards for choosing a preparer as they would for a doctor or lawyer, and be on the lookout for incompetence and criminal activity.

There are several basic types of tax preparers: certified public accountants, IRS-designated enrolled agents, tax attorneys, storefront agents (think H&R Block) and self-employed preparers.

The first three types must meet their own licensing agency’s continuing education and licensing requirements and are bound by ethical standards; they’re also the only professionals authorized to represent you before the IRS on all tax matters, including audits, collection and appeals. Others may only represent you for audits of returns they actually prepared. Always ask whether they belong to any professional organizations with continuing-education requirements.

Here are tips for choosing the right tax return preparer:

Request an initial free consultation at which you can share last year’s return and discuss how your situation has changed.

Ask how their fees are determined – some charge by the number of forms (schedules) filed, others by the hour. You might pay anywhere from $100 to many thousands of dollars, depending on the complexity of your situation, where you live, the agent’s credentials, etc.

One good way to get a sense of fees is to ask what they would have charged to complete your last year’s return.

Be wary of tax preparers who claim they can obtain larger refunds than other preparers. No one can estimate your refund without first reviewing your financial information.

Avoid preparers who base their fee on a percentage of the refund.

Consider whether the individual or firm will be around to answer questions about the return months or years after it’s been filed.

Check their credentials and find out if any complaints have been filed with the Better Business Bureau.

Reputable preparers will ask to see receipts and will ask multiple questions to determine whether expenses qualify for deduction.

Ask whether your return’s preparation will be outsourced, which means your personal information could be transmitted electronically to another firm, possibly outside the U.S.

Ask about their experience with IRS audits and what their fees would be to represent you in an audit.

Ask their policy for reimbursing you for fines, penalties and interest if it turns out your owe back taxes on a return they prepared – many have insurance for that purpose.

And finally, don’t muddy the waters by linking your tax-return fee to buying another product the preparer may be trying to sell, such as a refund-anticipation loan or check, retirement savings account or insurance policy.

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Does a Child a Tax Credit to Its Parents?

All parents hope that their children will be a credit to them. That can literally be the case at tax time.

The popular $1,000-per-child tax credit was made a permanent part of the U.S. Tax Code, thanks to the American Taxpayer Relief Act, also known as the "fiscal cliff" tax bill, that was enacted Jan. 2, 2013. That's great news for parents, who find the credit is an easy way to reduce their tax bills dollar-for-dollar.

In addition to the financial benefit, there are no records to keep or extra forms to file to claim the child tax credit. You simply enter the proper amount directly on your 1040 or 1040A form.

You will, however, have to fill out a worksheet to figure your exact credit amount. And if you're eligible for the additional child tax credit, there is even more paperwork involved.

Basic requirements

There are also certain tests you -- and your kids -- must meet before the Internal Revenue Service will let you claim the tax credit.

The key requirement is that your youngster be 16 or younger at the end of the tax year.

But the child doesn't have to be your child. A qualifying child in the IRS' eyes also could be your sibling (either full or step) or a descendant of one of these relatives, such as a grandchild, niece or nephew.

As for your kids, they can be yours by birth or adoption, or because your son or daughter was placed in your foster care by a court or authorized agency.

The IRS also looks at how much income you have in providing for most of the child's care.

The credit begins phasing out if you make $110,000 and are married, filing a joint return; earn $75,000 and file as head of household, single or qualifying widow or widower; or make $55,000 and are a married-filing-separ​ately taxpayer.

If you take other credits, they could affect the final amount of child tax credit that you can claim. Instruction booklets for both Form 1040 and Form 1040A contain the worksheets you'll need to figure this credit. You also can find detailed examples in IRS Publication 972, Child Tax Credit.

Getting extra credit

One drawback of the child tax credit is that it is nonrefundable. That means it can help you erase your tax bill, but it won't get you a refund.

Take, for example, Jim and Joan, a couple with two kids who translate to a total child tax credit of $2,000. However, because Jim and Joan's tax bill is $900, they lose some of the tax benefit of the credit. They can use it to wipe out what they owe the IRS, but the remaining $1,100 is effectively lost.

But Joan, Jim and other filers in similar situations might be able to get all or some of that nonrefundable portion back via the additional child tax credit. Again, some calculations will be required to determine the exact amount of this added credit. Generally, this is 15% of your taxable earned income that exceeds $3,000.

And parents with three or more children might be able to get back even more. In this case, parents could possibly get an additional child tax credit up to the amount of Social Security taxes paid during the year, less any earned income credit they received.

Of course, the additional credits, like most child-related duties, require extra time and work. To calculate your precise added tax credit, you'll have to complete a worksheet, then fill out Form 8812 and send it along with your individual tax return.

If you use tax software, that program will take you through the additional steps required to get the bigest tax credit from your children.

Don't let the extra work stop you. The calculations could really pay off.

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Signs of a Lousy Tax Preparer to Watch Out For

Taxes are hard enough without having to deal with a lousy -- or worse, unethical -- tax preparer who could set you up for an unpleasant audit down the line. How do you know you've landed a rotten fish?

According to the Internal Revenue Service, more than 144 million tax returns were filed by individuals in 2010, with gross collections totaling about $1.17 trillion. Professional tax preparers handled about 60% of those returns.

With that kind of dough on the line, taxpayers can't afford any mistakes -- but that's exactly what they seem to be getting from tax preparers. A 2006 study by the Government Accountability Office looked at a random sample of 19 tax preparers and found that all 19 made mistakes, including claiming too many exemptions, failing to claim allowable tax credits and missing tax deductions that could have saved their clients money.

So how do you know that you're risking a raw deal with your tax preparer? If you run into any of these scenarios, keep your guard up and your cash down -- and keep on looking for a licensed professional who knows what he or she is doing.

Your preparer promises a big refund

Any tax preparer who flat-out guarantees a big tax refund may be leading you on -- especially if he or she hasn't seen your financial documents.

"One of the biggest scams are tax preparers who advertise they can guarantee you the biggest refund before they even look at your tax information," says Yvette Rebella, a board member of the California Tax Education Council, a nonprofit tax organization.

Calculator: Should you adjust your withholding?

One potential tactic that results from a preparer's promise of a big refund is to juggle the numbers on your tax return to generate the big payout, but that risks an IRS review and bigger problems down the road.

Your preparer doesn't have proper credentials.

You can avoid potentially serious issues by checking if your tax preparer has the correct identification. The IRS recently began assigning Preparer Tax Identification Numbers (PTINs), and if your tax specialist can't provide one, you may be courting trouble by using an unlicensed preparer.

Your refund is not deposited into your bank account

If a tax preparer insists that any refund check be made out to his or her company, or deposited directly into a bank account without your name on it, that's a huge red flag that your refund may not find you when all is said and done.

The preparer's fee is based on a percentage of your refund.

Reputable tax-prep firms charge a flat fee for their services, based on the size and scope of your tax return. If a preparer bases your fee on a percentage of your tax refund, that should be an immediate deal-breaker. That gives the preparer incentive to pump up your refund by any means possible, which can invite some mishandling of your financial information.

No matter what, check with the Better Business Bureau.

The IRS advises that you do a full review of your tax specialist before you hand over your documents. Step one is to check with the local Better Business Bureau. If you see your tax preparer's name listed, it's probably best to keep looking for someone with an unblemished record.

This isn't to say that most tax preparers are unethical or unprofessional. By and large, most are diligent, talented and honest. But with your good name on the line (literally), it's best to thoroughly review any tax specialist you're thinking of bringing aboard.

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How to Make Your Tax Refund Pay You Back

Nearly half of Americans expect a tax refund this year, according to a survey by TD Ameritrade. Of those, only 15 percent say they'll fritter it away.

Instead, most who expect a refund plan to stash that money in saving accounts, use it as investments or to pay down debt. But with the average refund last year hovering around $3,000, and interest rates at all-time lows, the return on being virtuous isn't much of a reward.

With that in mind, we asked financial planners, bankers and the people at TD Ameritrade themselves to offer up ways to maximize the IRS's payback of the funds they've been holding for you. "The goal is not just to save it, but to make your refund pay you back," said Carrie Braxdale, managing director of investor services at TD Ameritrade.

Here are our favorite four ideas:

Bake It Into Your 2012 Return

There's something very pleasing about turning your tax refund around to lower your taxes further. Maybe the most gratifying version of this is using your 2012 refund to max out your IRA contribution for the same year (thereby getting a bigger refund).

Here's how it works: Let's say you've already contributed $2,000 to your tax-deductible IRA, helping you to get a refund of $3,000. Now refigure your taxes, this time adding the refund amount to your existing IRA contribution. (If you're an employee under 50 years of age, you can contribute up to $5,000 to a tax-deductible IRA for 2012; if you're over 50, you can kick in $1,000 more, for $6,000 total.)

If you file early enough, the IRS will send your refund back in time to make the contribution by April 15, 2013, the deadline for 2012 contributions. Otherwise, take the extra $3,000 out of savings and pay yourself back when your refund arrives.

Just don't forget to designate your additional contribution specifically for 2012, or your IRA company will assume it's a 2013 contribution. Also be sure to remember when you're refund comes that you've already promised it to your savings account or to your IRA.

If you've already filed, you can still take this route by amending your return with a 1040X form. Or you can sock the refund into your tax-deductible IRA for next year and make your planned 2013 contribution on top of it, raising your chances of maxing out for this year.

Increase Your 401(k) Contribution

Scott Tiras, a private wealth adviser for Ameriprise in Houston, suggested doubling down on your refund by upping the amount your employer takes out of your paycheck for retirement.

After putting your refund in an interest-bearing account, go to H.R. and adjust the portion of your paycheck that goes to your 401(k) by the same amount. Then compensate for the extra bite out of your salary by doling out the dollars from the refund. "This is an especially good idea if your company matches your 401(k) contributions," Tiras noted.

Pay Your Property Taxes

Your mortgage company holds money in escrow — often a few thousand dollars at any given time — to pay expenses related to your home, such as property insurance and school and local taxes. "Not all lenders allow this, but it's worth asking your lender if they will allow you to pay these bills instead," said Jim Kelly, head of direct banking at Capital One 360. Your refund, stowed in a savings account replaces their escrow account and makes the annual interest they are currently paying.

At today's rates, you won't make more than $20 a year or so on an average refund, but paying those bills yourself may prompt you to remember to shop around occasionally for better prices on homeowner's insurance or contest your property-tax bill.

Alternatively, says Kelly, you could put the refund against the principal left in your mortgage, treating your home "as a big piggy bank."

Remodel to Get a Tax Credit in 2013

Certain kinds of home improvements, like new windows, doors and other energy efficient improvements, can take up to $500 off of next year's taxes in the form of tax credits — that's a 15 percent return on the average refund, not counting the savings you'll likely reap from lower electricity, gas or heating oil bills.

The best resource for information on energy efficiency tax credits is the Energy Star website. It's also worth going to the Department of Energy's tax credits and rebates page, which lists state programs.

Some of these ideas can be labor-, time- or even frustration- intensive. If you're the type for who gets anxious about a few unanticipated thousand dollars sitting around unspent, you may be better off immediately paying off high-cost, short-term debt or using the refund as seed money for a much-needed emergency fund or a deep-freeze savings account.

In that case, you may want to file Form 8888 with your tax return, directing the IRS to electronically deposit the refund in a dedicated account, so that you'll never see it.

Then, as much fun as it is to get what seems like free money, get rid of next year's refund. Talk to your company's administrator about adjusting your W-4 form so the IRS withholds fewer of your dollars.

Just be sure to do something as smart with the extra cash as you did with this year's refund.

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Apps To Use for Easier and Faster Tax Filing

Filing your taxes by mail can mean waiting six to eight weeks for your refund from the date the return was received. But these days there's a faster way: using tax apps to e-file from your smartphone.

Of all ways to file, tax apps might be the fastest and easiest. These apps can do the job in as little as 10 minutes, and some fill in your return automatically using a photo of your tax forms. After you e-file, your refund will usually show up within three weeks.

In addition to allowing you file from your smartphone or tablet, tax apps can also help you organize receipts, track donations and file an extension.

Here are several apps to help you with your taxes, from start to finish:

1. Estimate your refund with TaxCaster.

Looking for some motivation to get your tax return in early? Use TaxCaster from TurboTax to quickly estimate your refund.

After you answer a few questions about your income, withholdings and deductions, TaxCaster displays your expected refund. You can also test how changes to your income and deductions will impact your taxes next year and adjust withholding accordingly.

TaxCaster is available free for both iPhones and Android phones.

2. File by photo with SnapTax.

Filing taxes from your smartphone is all about simplicity and speed. TurboTax's SnapTax combines both, boasting that users can file returns in 10 minutes.

SnapTax uses photo recognition software to automatically fill in your return with information from your W-2 form. Answering a few simple questions allows you to file your return directly from a smartphone.

SnapTax works only for simple returns, as users are limited to W-2, interest, dividend and unemployment income. Filers who own a home or make more than $100,000 ($120,000 if filing jointly) aren't eligible.

SnapTax is free to download for both iPhones and Android phones; it costs $24.99 to e-file one federal and one state return.

3. File free from your phone with H&R Block 1040EZ.

The H&R Block 1040EZ app is just like TurboTax's SnapTax with one key difference: It's free to file both federal and state returns.

As with SnapTax, users photograph forms and fill in the rest of the information. The downside: This app comes with more restrictions than SnapTax. Users need to be married or filing jointly, have income less than $100,000, can't own real estate, and can't have dependents. As the name suggests, this app works only when filing a 1040EZ.

The H&R Block 1040EZ app is free for both iPhones and Android phones.

4. File complicated federal returns free on your tablet with TaxACT.

If you're filing a more complicated return than the apps above can handle, try the TaxACT Free Federal Edition app for Android tablets and iPads.

This app is similar to tax software you'd find on the Web; it supports all forms eligible for e-filing. Users can access their return on their tablet or on a computer without having to re-enter information.

TaxACT Free Federal Edition is a free download on both iPads and Android tablets. Filing federal returns is free, and state returns cost $14.99.

5. Track donations with iDonatedIt.

Staying organized throughout the year can save time, aggravation and possibly money when it's time to file. With the iDonatedIt app, you can track deductible charitable donations so you're not searching for receipts come tax season.

Created by certified public accountants, this app helps you stay in compliance with IRS rules on charitable contributions. Users can save descriptions, take photos and store the values of noncash donations like clothing or household items. If you're unsure what your donation is worth, iDonatedIt can help you determine fair market value too.

IDonatedIt costs $2.99 and is available for iPhones.

6. Keep digital copies of receipts with Shoeboxed.

For filers claiming business expenses or deductions on their returns, managing receipts can be a pain. Between keeping track of paper receipts, categorizing expenses and tallying up totals, dealing with receipts is often a hassle.

To stay organized throughout the year, Shoeboxed will digitize your receipts. Just snap a photo or download your receipt to the app. You can quickly categorize the expense type, and the information is neatly organized when it's time to file.

A limited version of Shoeboxed is free for both iPhones and Android phones. The premium version starts at $9.95 per month.

7. File an extension with TaxSoftware.com 4868.

TaxSoftware.com 4868, named for the IRS form used to file an extension, lets you do so with an iPhone.

When a user inputs the necessary information, the request goes directly to the IRS. The creators claim that filing an extension takes only 30 seconds with their app -- an important consideration when every second counts up to the midnight filing deadline on April 15.

TaxSoftware.com 4868 costs 99 cents in the iTunes App Store.

8. Track your refund with IRS2Go.

Once your taxes are in, the hard part is over. But if you're expecting a refund, you may be eager to get it.

With the IRS' official app, IRS2Go, you can confirm your return was received and track the progress of your refund. You can also order old returns or contact the IRS for assistance.

IRS2Go is free and works on both Android phones and iPhones.

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