Tips for filing your 2011 tax return
Hiring a tax prep pro can help ensure you file your return correctly. (Photo by Katie Jacewicz)
The tax deadline is rapidly approaching – but for taxpayers who haven’t filed yet, there is some relief.
Since April 15 falls on a Sunday this year, the deadline to file your return with the IRS has been extended until April 17 – giving millions of taxpayers slightly more breathing room until tax time.
Unfortunately, if you’re still under the gun to file your taxes and have considered using a professional tax preparer, your choices may be limited. Many tax preparers’ schedules are quickly booked early in the year.
However, for simple returns, retail outlet preparers and franchise locations may still be an option, since they’re typically only open during tax season.
Significant differences in the 2011 tax filing season
One of the biggest differences in tax filings for 2011 was the reduction of a generous credit for home energy efficiency improvements.
“Energy efficiency home improvement tax credits were curtailed in 2011 from a more generous maximum of up to 30 percent of qualifying property or $1,500 [in 2010] to much lower 2011 tax credits of $500,” says John Barucci, president of highly rated Padgett Business Services, a tax preparation provider in Westwood, Mass.
If you made energy efficient home improvements in 2011, check with the IRS or Energy Star to see what qualifies for the now-reduced energy tax credits.
Some energy improvements, such as installing residential solar panels, solar water heaters, wind turbines or a geothermal heating and cooling system, still qualify for generous tax credits not set to expire until 2016.
Other significant tax credit changes for 2011 include the expiration of the $8,000-maximum First-Time Homebuyer credit and the Making Work Pay credit, which authorized up to $400 for single workers and up $800 to married couples filing a joint return.
Don’t make these common mistakes
Steven Landau, an enrolled agent and owner of highly rated tax prep firm S. Landau Services in Seattle says reducing your stress at tax time requires a year-round mentality and attention to detail. He suggests keeping this general advice in mind, but that taxpayers should consult with a professional for matters that affect their individual situation.
“Be careful to keep expenses and donations in the proper calendar year,” he says. As an example, expenses related to property taxes are deductible based on the calendar year when they were paid – not based on which year’s assessment is involved.
Landau also recommends keeping receipts for every donation you’ve made that will go towards tax deductions or credits. “There is no ‘safe’ amount of donations without a receipt – unless you count $0,” he says.
Before you file, any donation over $250 should be accompanied by a letter from the organization containing language that you didn’t receive anything of value for the contribution, Landau advises.
Going forward, Barucci says one of the easiest ways to avoid creating a complicated tax situation is to consult with a tax advisor throughout the year before significant tax-affecting financial decisions are finalized.
“The most common problem is clients owe taxes because they failed to consider things that happen during the year that affected their tax situation,” he says. “A tax advisor ought to be able to analyze a taxpayer’s situation and advise them during the year to make adjustments where necessary.”
7 tips for hiring a tax preparer
1. Stay organized throughout the year – keep important financial, investment, real estate and other tax-related documents in a safe place for easy retrieval at tax time.
2. Keep receipts for all tax-deductible donations.
3. Consult with a tax advisor before making tax-significant decisions.
4. Schedule an appointment with a tax preparer as early as possible.
5. Ask for credentials and understand what they mean:
- Certified public accountants, or CPAs, undergo rigorous training including minimum education and experience, and passing a qualifying exam, but not all specialize in taxes.
- Enrolled agents, or EAs, have passed a tax-specific exam, take continuing education courses and are authorized by the IRS to represent taxpayers.
- Tax attorneys are lawyers who have passed the bar and specialize in tax laws and regulations. They may be best suited to handle complicated tax matters or disputed filings.
6. Understand how the preparer charges for the work. If you provide a significant amount of detail about your taxes, an experienced preparer should be able to provide a reasonable estimate.
7. Make sure you review the return and that the preparer signs it with their preparer tax identification number (PTIN) before submitting it. You should be provided a copy of the return for your records.