File Taxes for Free – It’s Easy as 1-2-3!
File Taxes for Free – It’s Easy as 1-2-3!
By Sharman Lawson
It’s that time of the year that most people dread and wish would go away – It’s tax time! Have you done your taxes yet? Did you pay someone to prepare them? I’m here to tell you that what you don’t know can hurt you. Unfortunately, one thing I have learned helping people manage their finances, is that many are perishing because they lack knowledge. Truth -- this world’s system is set up to separate you from your hard-earned money, and if you keep reading you’ll understand why.
I just talked to a lady named Linda who paid $200 to a tax preparer that took 45 minutes to tell her she owed $8,500. Linda’s adjusted gross income was less than $50,000. The tax preparer never asked her if she had a mortgage, gave to charities or if she had any deductions. Linda was just a number and part of the preparer’s production – After I helped Linda she owed $2,800 – Big difference!
Linda’s first mistake, not knowing that she could prepare and e-file her taxes for free! Yes – I said for free. Is your adjusted gross income (AGI) less than $50,000? If so, you can prepare your taxes for free, too. Go to www.irs.gov to prepare your federal taxes for free. Last month I walked a client through the process to do her taxes for free; she received a refund of $5,600. She said, “For years I have paid $200 to a tax preparer; now I feel empowered and more in control of my finances.”
To get your state taxes prepared for free go to your state income tax website. There you should be able to prepare and e-file your taxes for free, if they offer it. Most states offer the free service. If you prepare your state taxes on the “free” federal website they will charge you for preparing the state taxes. If you are expecting a refund, you can e-file, and get your refund deposited into your bank account within 10 days.
Here are a few additional tips to help you prepare to have a more pleasant tax experience. My favorite word is plan, plan, and plan. Therefore, you should start each January planning for the next tax year. I believe having a plan and strategy will lessen the burden and pain of taxes owed, and you never know you may get a refund with proper preparation.
Contribute to an Individual Retirement Account (IRA): For 2007 you can put a maximum of $4,000 towards your IRA for yourself, and if you are married your spouse can put a maximum of $4,000 even if they do not work. That is an $8,000 deduction before you get to your adjusted gross income (AGI).
Give to your church or favorite charity: What a great way to accomplish two goals! One you are helping yourself and the other you are helping someone else. You can deduct your giving 100% on your Schedule A form for itemized deductions. Also, if you give items to places like the Salvation Army or the Goodwill, you can write those items off by estimating their value.
Deduct your property taxes and car tag expenses: Your taxes on your property and car tags are tax deductible. This is when you want to count every penny you can. Why pay Uncle Sam a dime if you don’t have to – He gives you permission to find ways to avoid paying him legally.
Be sure to include your mortgage interest: This is what the average person lives for, writing off their mortgage interest on their taxes. With all the interest you pay on your home, why not use it when you need it to benefit you.
Start a part-time business on the side: I always encourage people to start a part-time business on the side for the following reasons:
- You might find your purpose and passion
- You might make extra income or make a lot of income
- If you have a home office you may be able to deduct a percentage of your utilities and mortgage.
- Additionally, you may be able to write-off your car maintenance and expenses or mileage, office supplies, some insurance, and many other deductions that you may not be aware of.
- Having a business with tax deductions can be a tool that you can use to pay less taxes
The bottom line, people perish financially because they lack knowledge, a plan, and basic organization. Building wealth is not based on how much money you make; it is based on how much money you keep. Find out what is available to you for free, research what tax breaks you can legally take advantage of, and start planning your taxes in January of each year so you will have a strategy how not to pay taxes.
Have you prepared your taxes yet? You have the information and tools to get started, so go for it!
Sharman Lawson is the President of Freedom Concepts UsA, a debt, money and financial coach, speaker, consultant, and author of the book 12 Steps to Eliminate Debt Forever! Visit her website at www.sharmanlawson.com