Tax Time Tips for 2006

If you are filing your 2006 taxes, there are some helpful tips that could save you a lot of time and money.

1. Use tax software. Some software is free if your income is under a certain level. Otherwise, it is helpful to use turbotax or other software. While the expense is up to $100.00, this could save you a lot of time and stress. If you are self-employed, do not consider taking on your taxes alone. You will not only leave yourself open to mistakes and an audit, but you will spend hours trying to calculate your estimated taxes and other spreadsheets that these software programs can do for you.

2. Maintain all records. Start a file labeled Taxes 2006. Put everything in that file that pertains to your 2006 taxes. As soon as you get any W-2s or 1099s in the mail, put them in your file. By April, you will have all necessary records. Once you actually compile your tax return, keep a copy of it in your folder. Keep this file for seven years (the general look-back period for audits). You will be surprised how handy this file will be if you need to look up any of your tax information later.

3. Maximize deductions. Make sure you don’t miss any of your deductions. This could cost you a lot of money. If you are claiming deductions, make sure you have documentation to back them up. You may want to itemize your deductions if you have a mortgage with high interest payments throughout the year or other qualifying expenses. Otherwise, the standard deduction is probably enough. You may be able to deduct student loan interest, self-employment taxes, moving costs, or other expenses.

4. File your taxes on time. By filing on time, you will save money and stay under the IRS radar.

5. Maximize contributions to qualifying retirement accounts. Some accounts will reduce your taxable income, such as a SEP or 401k. Use these accounts to minimize your taxes due. If you haven’t done that for 2006, increase your contributions this year to reduce taxes owed next year.