Seeing the results of their federal tax return is a happier experience for more Americans this year. From credits for homebuyers and energy-efficient home improvements, to increases for the Earned Income Tax credit and standard deduction, the majority of taxpayers will receive a bigger refund or less tax owed on 2009 returns.
Despite the number of tax changes, experts agree doing your own taxes is still easy, fast and affordable. "The key this year is to get organized beforehand and to allow for a bit of extra time to make sure you don't leave any money on the table," says Jessi Dolmage, spokeswoman for 2nd Story Software, the makers of TaxACT.
Dolmage shares five easy ways that all taxpayers can maximize their federal refund.
1. Get organized. Gather your tax documents and organize by category. Locate records related to events including unemployment, college, new vehicles, having or adopting children, buying a house, moving and changing jobs. New tax laws may give you bigger breaks for those events this year.
2. Use tax preparation software. If you're going to do your own taxes, why pay if you don't have to? Free solutions like TaxACT Free Federal Edition guide you through the new credits, deductions and tax laws. They also do the math, help find missing information and identify potential errors. TaxACT Free Federal Edition at www.taxact.com allows everyone to prepare and e-file for free - regardless of income, age, state of residence and military status. TaxACT also includes a maximum refund guarantee and all e-file forms for simple and complex federal returns.
3. Remember the Earned Income Tax Credit (EITC). Historically, one in four eligible taxpayers fail to claim this credit, designed for those whose earned incomes are below certain thresholds. The credit amount is based on filing status, age and number of qualifying children. Those without children also qualify. For 2009, more workers and families will qualify for this refundable credit. According to the Internal Revenue Service, one out of every six taxpayers will qualify this year. Taxpayers claiming the federal EITC may also be eligible for a similar credit on their state or local return.
4. Consider itemizing. The standard deduction for 2009 has increased to $5,700 for individual or married filing separately returns, $11,400 for joint returns or qualifying widow(er) returns and $8,350 for head of household returns. If your eligible deductions exceed the standard deduction amount, you're likely better off itemizing. Software like TaxACT will identify your best option after you enter your deductions.
5. File and pay as much as possible by April 15. Even if you can't pay your entire tax bill by the deadline, file early and schedule payment any time before April 15 (June 15 for taxpayers who qualify as "out of the country") to avoid penalties and interest. If you need a six-month extension (four months if "out of the country"), Form 4868 is due by April 15 and will extend your filing deadline to Oct. 15, 2010. Remember, an extension to file is not an extension to pay.
The fastest way to get your federal refund is to e-file your return and choose direct deposit, says Dolmage. The exception is those claiming the first-time homebuyer credit. To help prevent fraud, the IRS is requiring documentation for the credit to be mailed with their return and Form 5405 for the credit. In addition, the IRS says it likely won't start issuing those refunds until the end of March. Learn more about 2009 tax law changes and TaxACT at www.irs.gov and www.taxact.com. (ARA)