Tax season is officially under way, and Mississippi University for Women accounting instructor John Williams offers some tips to keep in mind when filing your 2013 tax return.
Common forms that you will want to have on hand to begin the tax preparation process, from an income standpoint, include W-2s and 1099s from various reporting entities such as banks, brokerage firms and any contractual services that were done in 2013.
From a deduction standpoint, the list would include any mortgage interest statements, charitable contributions made, medical and dental expenses paid, property taxes, car tags and of course any college tuition payments.
“The failure to recognize potential deductions is one of the biggest oversights people tend to make when filing taxes,” said Williams. He added, “The failure to claim all deductions you are entitled to can significantly increase your tax liability.”
Many wonder when is it is necessary to hire a professional to prepare their return. Williams said, “While many of the online tax preparation websites do an adequate job of guiding you through the process, as the potential income and deduction sources become less generic in nature, the potential to overlook something, whether income or deduction, increases drastically.
“As a rule of thumb if you are planning on itemizing deductions, it’s usually better to let a tax professional prepare your return for you,” said Williams. “If you operated your own business or if you experienced an unusual tax event, such as casualty loss, you should strongly consider using a tax professional.”
Certified Public Accountants are considered the benchmark in tax preparation and stay on top of all the latest tax code considerations while additionally representing their clients against claims or adjustments the IRS may come back against the filed return.
As for 2013 changes, he said there were not many and most of those involve people with income in excess of $250,000.
To estimate a potential refund, Williams suggested following a simple process. Look at your 2012 tax return and take your total tax liability and then divide that by your total gross income. This should give you a good indicator of your effective tax rate from last year. Then estimate your total gross income for 2013 and multiply that by your determined effective tax rate. That amount should be a valid indicator of what your projected total tax liability will be. Finally, compare that amount to the amount you had withheld from your W2 and paid in estimate taxes and that should provide a quick answer as to whether you can plan on getting a refund this year.
Finally, Williams cautioned tax filers that because of the 16-day government shutdown in October when the IRS typically tests its software, there will probably be delays in issuing refunds, especially early in the process. So be prepared to wait up to three weeks for your refund.
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