6 Tax Return Secrets Most Accountants Hide From You

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Even though filing your tax return is something you do every year, not everyone gets familiar with it over time. Besides deciding which service or software is best for you, new income streams and life events can change your information, which means this year’s tax filing won’t be the same as last year’s filing.

In fact, for some, tax season comes with so much stress that you feel like ripping your hair out. While this may sound like an exaggeration to you, it is the reality for others. But while there aren’t two individuals with identical financial situations, it can certainly help to seek some help from an accountant before filling out the forms.

However, even if you’ve hired an expert to help you file your tax return, there are some things you should know about filing. So that’s why it’s important to ask your accountant any questions you may have about taxes and filing. If you’re not happy with the answers, you can choose someone else or do some research on your own.

In fact, if you were to ask your accountant, most would probably come up with the same pearls of wisdom on how to not forget or what to not do in the whole tax-filing process.

In order to save you from trouble—and anxiety—we tracked down a tax guy, and he shared with us some tax return secrets that could come in handy. Check this out!

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1. You may not always get a refund

A “tax refund” is a reimbursement taxpayers receive when they have overpaid their taxes. While taxpayers usually see this refund as a sort of bonus or even as a stroke of luck, it often defines what is basically an interest-free loan made to the federal or state government.

Overpaying taxes usually happens when employers withhold too much from taxpayers’ paychecks. According to the US Treasury, nearly three-fourths of taxpayers have their taxes overwithheld, which means millions of people get their tax refunds yearly.

While receiving some money back after filing your tax return isn’t uncommon, financial experts point out that expecting you’ll always get a reimbursement can be dangerous.

As Robbin E. Caruso, a certified public accountant, explained, you won’t be owed funds this year just because you received a refund last year. That’s why it’s very important to carefully project your tax liability every year. Also, make sure you make any payments required through tax withholding and with their tax returns, estimated taxes, or tax extensions in order to avoid interest and costly penalties on them.

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2. Things can change after filing for divorce

It’s well known that getting married can change the way you prepare your tax return, especially if you opt for married filing jointly. The same is true if you have kids, as you can claim them as dependents. And, yes, getting divorced also changes a bit the way you prepare your taxes.

In fact, financial experts advise that there’s one little-known rule that could potentially create some issues. According to them, most newly divorced taxpayers claim their kid as a dependent on their tax return, while the ex-spouse does the same. The result? The IRS rejects their return.

Versha Subramanian, a certified public accountant, explains that not everyone knows that you can only claim child-related tax credits if you’re the parent who had them living with you the most during the year. When it comes to 50/50 physical custody, the parents can only alternate claiming the child as a dependent from year to year.

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3. How you file your taxes can have a great impact

Anyone who has searched for ways to file their tax returns knows there are plenty of options. From pared-back free services to premium software, most taxpayers can find the way that works best for them and their budget. But if you’re looking to avoid any lags or mishaps, there’s only one way you should always file your tax returns.

According to financial experts, the best way to do that is to e-file if possible. It may be surprising, but the IRS is still behind on paper returns from the coronavirus pandemic, and it can take up to two years to process them. In other words, if you would like to receive your refund as soon as possible, e-filing is the way to go.

The same is true when it comes to payments from or coming back to the government. While the chances for a paper check to get lost in the mail are pretty high, an electronic deposit and a tax payment are trackable and reliable.

The bottom line here? Always opt for the electronic option when it comes to taxes and money.

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4. Hire the right kind of professional to help you submit your taxes

For some people, hiring an accountant can be the best option to help ensure their tax returns are filed correctly. But similar to choosing the right DIY software, it’s also important to ensure you’re hiring the right professional for your specific needs.

Let’s say the accountant helping you prepare your tax return is no stranger to your work. This would mean they are far more likely to have detailed information about tax breaks and deductions that other accountants won’t know, which can definitely lower your tax bill.

And it’s also vital to remember that when you hire them to take you on as a client, that also matters. If you intend to work with a CPA, make sure you reach out with enough time. Tax preparers can be pretty busy, and their schedules fill up quickly.

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5. Start organizing your finances as soon as possible

Tax preparation can be nerve-wracking even if you don’t have to look up information or hunt down paperwork on a tight deadline. That’s why the process of organizing your finances for your subsequent filing should start as soon as the tax season begins.

Financial experts recommend making a habit of keeping all tax-related documents during the year. For instance, if you make a charitable contribution, make sure you save a copy of the payment. Whether it’s a credit card statement or a check, retain all important documents, including the contemporaneous written acknowledgment that supports the donation.

Other examples of items you should save include payments for childcare costs, receipts for deductible business expenses, real estate taxes, information regarding all cryptocurrency and foreign transactions, and documents related to the sale of capital assets like stock or real property.

A good piece of advice is to make a checklist of all the documents you needed to prepare this year’s tax return and use it as a general guide for next year.

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6. Don’t be too eager to submit your filing

Some people may choose to file their tax return well before the deadline, whether it’s because they like to get things off their to-do list or have a very busy schedule. However, financial experts say that this kind of hurry isn’t always a good thing. According to them, this is one case where being a little too early may actually end up costing you in the end.

In fact, accountants usually recommend not filing as soon as the tax season opens. That’s because the IRS may be pending a new ruling or you may receive a tax reporting document late. So, it’s best to wait a few weeks into tax season to submit.

You may also want to read You Can Save $10K NOW With These Climate Tax Breaks.

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