New Online Resources for Tax Time
By Elizabeth Wasserman
Tax time used to be marked by sorting through that shoebox of receipts and the pressure of postmarking your return by April 15. With home computers and the Internet, tax season has been forever changed -- for the better.
On the web, the tools of the accounting trade are yours for the taking. From mortgage savings tax calculators to Q&As about the federal stimulus program tax rebate to the Internal Revenue Service (IRS) form No. 8839 for Qualified Adoption Expenses, the Internet is a virtual library of tax tips, forms and information.
Online, you can find rundowns of the most often overlooked write-offs, locate the precise forms you need and file electronically to federal and most state tax collectors. But there's one caveat when scanning the web for do-it-yourself tax tips, warns Cindy Hockenberry, tax information analyst with the National Association of Tax Professionals: "You're the taxpayer. You're signing the return. You take the ultimate responsibility for its accuracy. You can't go back and blame a web site because it told you to take a $4,000 earned income tax credit that you didn't deserve.”
That said, here's how to best use the online tools of the trade this tax season:
Online Tax Tip #1: Root out every last write-off
Did you buy a hybrid car in 2007? The Internal Revenue Service (IRS) web site features a handy list of different makes and models that qualify a car owner for tax credits (the Ford Escape Hybrid 2WD qualifies for a $2,600 tax credit, while the Chevrolet Silverado 4WD Hybrid Pickup only nets a $650 write-off.) The agency also has a schedule of the phased out tax credits for older hybrids that have sold more than 60,000 vehicles, such as the Honda Accord Hybrid AT (phases out in January 2009) and the Toyota Prius (if you bought it after October 1, 2007, you get $0 in credits).
H&R Block's web site abounds with other helpful hints. A handy “Deduction Finder” allows users to search for write-offs by occupation. So police officers can learn that they may be able to deduct not only uniform expenses, but also steel-toe shoes and flashlights if used for police work. Plumbers may qualify to deduct safety eyewear and mobile phones.
Liberty Tax Service, the second largest international tax preparer, offers its own online list of overlooked deductions and warnings about old ones, such as reminding taxpayers of the stricter federal standards for writing off some donations to charities. (The bottom line: You need a receipt for every charitable donation you claim and appraisals for items worth more than $500.) Jackson Hewitt Tax Service, which has 6,000 U.S. offices, maintains a list on its web site of the Top 50 most overlooked deductions. For instance, the site advises that some people can deduct contact lenses. Alimony can be deductible, but child support can't. Points paid on a mortgage, taxes paid to a foreign government, and some smoking cessation treatments can sometimes be itemized, too.
Online Tax Tip #2: Get tax preparation help
Say what you will about the IRS, but its web site features downloadable forms with explanations on how to fill them out and helpful FAQs about who qualifies for what. Yahoo! Finance has links to individual tax forms by state (in those states that have an income tax), in addition to federal forms, how-to guides on tax changes and the alternative minimum tax and articles on such topics as, “Ten Things Your Tax Preparer Won’t Tell You.” Smart Money magazine has a “marriage penalty” estimator, a "nanny tax" calculator and a worksheet letting you figure out how to keep as much profit as you can from company stock options. H&R Block also has handy calculator tools to estimate daycare tax benefits and education tax benefits.
Online Tax Tip #3: File electronically Remember when we had to go to the post office by midnight on April 14? Well, now you don't have to leave home to file your taxes. Electronic filing is available not only at the federal level but in most states, as well. "The nice thing about e-filing is that the IRS will send you back an acknowledgment that they've received your return and accepted it," Hockenberry says. "It gets into the processing system faster, and you get your return sooner."
Also, if there's a data entry error -- like you mistyped your social security number -- the e-filing web site will let you know. Many do-it-yourself filers also use one of the numerous handy tax preparation software programs available for quick downloads these days, such as TurboTax, Quicken or TaxCut.
Online Tax Tip #4: Get organized for next year
If you decide to hire an accountant after all, read up now so that you can save next year. MSN’s MoneyCentral features tips on how to be more aggressive in your tax planning for 2008. You can take advantage of higher deferrals for some retirement investments or plan ahead if you want to be earning interest on what would be your tax refund instead of expecting one lump payment back from the IRS next year. The site also lets you know that there are still tax shelters you can take advantage of -- owning a home or investing in oil or gas among others.
Since many formerly full-time workers are now self-employed or consulting, H&R Block also features resources to help in the transition with a self-employment tax calculator to figure out what you should be paying Uncle Sam quarterly. In addition, the site points out that you may be eligible for perks, such as deductions of business use of your home and/or car. The site also advises that you may be able to defer some income to the next tax year. For example, if you incurred expenses in 2007, but weren’t paid until 2008, you can deduct the expenses now but don’t have to count the income until next year.
Ben Franklin once wrote that there's nothing certain but death and taxes. With help from the Internet, you can at least be well-prepared to face one of those fates.
Elizabeth Wasserman is a freelance writer and editor based in Fairfax, Va. She writes for a variety of publications including Congressional Quarterly, Inc magazine, and she edits the online program CIO Strategy Center.