While there are many tips regarding what to do once you are facing a notice from the IRS, or already in the midst of litigation, the following are preemptive steps. These are tips that you can keep in mind throughout the year to lead to a less stressful April.
Consider the following ways to hopefully keep yourself out of tax court altogether:
- Keep track of your charitable donations--remember that even clothing donations to your local Salvation Army are tax deductible. Many of these non-profits give you a piece of paper to write the items donated and their potential value as proof of your donation. These small donations can really add up.
- Keep your receipts--In addition to being able to keep accurate track for your purposes, these can also be integral in the case of an audit.
- Hire a professional to prepare your taxes-- Even though you may not think it's worth the expense, consider the fact that experienced professionals may be able to find deductions and/or credits that you may not have realized existed or qualified for. These cost savings may more than pay for the preparation services.
- Avoid legal self help software--While there is something to be said about the accessibility and ease of use of these programs, keep in mind that they operate on the bases of mathematical calculations and logarithms. Because of this rigidity, they do not recognize inconsistencies in your returns that you may not have intended. (These are the sorts of errors that can result in you being audited). Being able to discuss your situation with a human being can be invaluable.
- Increase contributions to your retirement account--depending on the type of retirement account, you can remove an additional $5,000-$22,000 from your taxable income.
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