Countdown to Tax Day: WalletHub’s 2017 Expert Tips
3:54 AMPosted by: John S Kiernan
With Tax Day fast approaching, the roughly 20% of Americans who wait until April to file their returns have a lot of catching up to do. And that’s a recipe for costly mistakes. Taxes are complex under normal circumstances, after all, and things only get tougher when you add a time crunch to the mix. With that in mind, WalletHub compiled a list of last-minute tax tips and reminders to answer your remaining questions and help you pay off Uncle Sam without issue.
These tips are the product of both WalletHub’s industry research and our conversations with numerous experts in relevant fields, such as individual taxation, tax law and consumer psychology. Take this advice to heart, and tax season will be a breeze. You can (ac)count on it!
- Don’t Forget to…
- Time Management Tips
- What to Do If You Can’t Pay
- Making the Most of Your Refund
- Ask the Experts
- Watch Out for Scammers: Tax season has been known to attract a host of shady characters, ranging from crooked tax preparers to identity thieves.
“The number one cause of tax fraud is identity theft,” said Lee G. Knight, an accounting professor at Wake Forest University. “Once identity theft is reported to the IRS, the victim may get his or her refund but not before going through a lengthy process that requires the victim to file multiple affidavits and gives the IRS time to investigate the fraud.”
Fortunately, there are many strategies you can employ to protect yourself from scammers during tax season. They include signing up for free 24/7 credit monitoring to ensure your personal information isn’t misused and making it a policy not to give financial information to anyone who contacts you, rather than the other way around. Check out WalletHub’s Tips for Avoiding Tax Fraud to learn more.
- Verify You Have All Requisite Paperwork: Organization is vital to a well-prepared tax return. So your first step in the preparation process should be to gather all the paperwork and information you need — for the correct year. The most important of these include your Social Security card, income statements (e.g., W-2/1099 form), prior year’s tax return (for comparison), health-coverage statement and bank-account information.
It’s especially important for independent contractors to make sure they receive all 1099s from their clients, as they can be sure the IRS will. Keep in mind that businesses are not required to send a 1099 if the contractor earned less than $600 during the year, but that income should still be reported on the contractor’s tax return.
"Many people forget or neglect to report all of the income reflected on tax reporting forms they receive," said Linda Galler, a professor of tax law at Hofstra University. "Sometimes, this is inadvertent, but more often taxpayers mistakenly assume that they need not report small amounts. IRS computers will generate bills, which, if not promptly paid, could escalate into quite a nuisance."
If you moved recently, make sure to check for any missing forms or important IRS correspondence at your old address.
- Seek Free Advice: Having someone to bounce questions off of or even just an extra pair of eyes to check your work can help you avoid crucial mistakes. It can also work wonders for your stress levels. Just make sure to properly vet anyone you decide to work with.
The IRS’s Volunteer Income Tax Assistance program is one particularly reliable source for tax help, and there are locations throughout the U.S. “Many tax and accounting professionals, law students and business school students are trained and volunteer at these sites,” said Andrew Pike, a law professor at American University.
- Use Reliable Tax Software: The right tax-prep program can make the process painless, doing pretty much everything for you based on your answers to some simple questions. Just make sure to compare options and read customer reviews before deciding which software to use. In particular, pay attention to each option’s security standards and data-breach history.
You can find a list of IRS-approved tax software here.
- Contribute to an IRA and/or HSA: Contributions from an Individual Retirement Account (IRA) are both tax-deferred and tax-deductible, even if you don’t itemize. Most people can contribute up to $5,500 per year, while the limit is $6,500 for folks who are 50 or older. You also have until April 18 to make a contribution that counts toward your 2016 taxes.
If you’re covered by a high-deductible health plan – characterized by a minimum deductible of $1,300 for individuals and $2,600 for families – you can also deduct contributions from a Health Savings Account (HSA) without itemizing. The contribution limits for 2016 are $3,350 for individuals and $6,750 for families.
- Use Your Losses to Your Advantage: If you itemize deductions, don’t forget to include the following (all of which are deductible to varying degrees):
- Realized capital losses (e.g., stocks you sold for less than the price you paid)
- Gambling losses to the extent of your winnings (e.g., if you have $3,000 in winning bets and $4,000 in losing bets, you can only deduct a maximum of $3,000)
- Mortgage/home-equity loan interest
- Student-loan interest
- Interest paid on business loans and lines of credit during the year
“One of the most common reasons why people overpay on their investment-related taxes is by failing to maximize the use of any capital losses they may have,” said Orly Mazur, an assistant professor of law at Southern Methodist University. That’s why it’s generally wise to take losses in order to offset your tax basis on capital gains, and vice versa.
“People also overpay on their investment-related taxes by unintentionally purchasing stock, selling it, and then re-purchasing it 30 days after the sale,” Mazur said. “This causes the ‘wash sale’ rules to apply, which generally deny the taxpayer from claiming the loss.”
- Declare Foreign Accounts: People who have more than $10,000 in a foreign financial account (e.g., bank account or mutual fund) or who are signatories on such accounts are required to file a Foreign Bank Account Report with the Treasury Department by April 18, 2017. And there are stiff penalties for failing to do so.
- File a Gift Tax Return: You must file this type of return by April 18 “if you made gifts in excess of the annual exclusion amount,” which is currently $14,000 per recipient, said Kerry A. Ryan, an associate professor of taxation at Saint Louis University. “There is no extension to take advantage of the annual exclusion.”
Gifts are generally defined as goods, services or money given to an individual without compensation. More information can be found on the IRS website.
- Assume You’ll Be Audited: It’s never wise to cut corners, but doing so is especially problematic when it comes to your federal income tax return. Doing so will increase the chances of both an expensive mistake and IRS inspectors showing up at your doorstep. And there are a variety of possible punishments for tax evasion, from bank levies and tax liens to jail time.
"Returns are generally selected for audit if there is something out of the ordinary on the return," Galler said. "If there are numerous math errors on the return, if the return is missing forms and schedules, or if the deductions that are taken on the return fall outside of statistically normal ranges, the IRS is likely to look more closely."
This just goes to show that being thorough and preparing for the worst can eliminate serious headaches down the line. It also underscores the importance of keeping well-organized records. The IRS now has up to six years to audit a return in many cases, so you’d be wise to keep all underlying documentation for at least that long.
- Make a Plan: The whirlwind that is last-minute tax filing can easily cause a bit of paralysis by analysis. People have so much to do in so little time that they often become overwhelmed and waste time worrying instead of doing. And the problem tends to worsen the closer we get to Tax Day.
That’s why it’s so important to make a list of what needs to be done and which documents you need to collect. Estimating how long it will take to complete each task will help, too, enabling you to schedule everything that needs to be done before your return is due.
- Don’t Sacrifice Itemized Deductions For Time’s Sake: If you’re feeling rushed, you might be tempted to just opt for the standard deduction instead of seeing what itemization would get you. But guessing that the easy road is the cheapest isn’t a good strategy.
You need to make an educated decision about which option best suits your particular situation by comparing your total deduction amount in each case. And in doing so, don’t forget that the standard deduction and itemization are mutually exclusive.
“Many individuals do not realize that certain items touted as deductions, such as charitable contributions, are in fact only deductible if the taxpayer is eligible to itemize on their return,” said Maureen Bruns, an assistance professor of accounting at the University of Cincinnati.
- Keep Track of What Throws You Off: The anguish we suffer during tax season often fades from memory over the course of the year. And since you don’t want to find yourself in the same predicament year after year, you’d be wise to make a list of what gives you trouble during the tax-prep process and how you can improve in each area.
For example, this might include saving links to relevant forms and educational info on the IRS website, along with notes explaining confusing requirements. Or if you’re a procrastinator, you may want to add a reminder to your calendar in the hopes of starting earlier next year.
“The best advice is to think of your tax preparation efforts as an ongoing, year-round effort,” said Wilton Hyman, a law professor at New England School of Law.
- Adopt a Filing System: There is a direct connection between organizational skills and tax-season stress. Keeping track of pay stubs, receipts, and any other information you’ll need when April rolls around not only makes tax prep much more efficient, but it also stands to lower your blood pressure a bit and improve your overall WalletFitness.
Everyone has different organizational styles and preferences. But as long as you put a clear method in place and force yourself to stick to it throughout the year, you’ll be in good shape.
Not paying your taxes is not an option. As Benjamin Franklin once famously said, “In this world nothing can be said to be certain, except death and taxes.”
There are, however, a number of ways that people who owe Uncle Sam can minimize unnecessary complications as well as buy themselves time to pay. You can check them out in our article about What to Do If You Can’t Pay Your Taxes.
Making the Most of Your Refund- Relax: “If you know that you will get a refund as usual every year, relax,” said Ahmed M. Ebrahim, an associate professor of accounting at Fairfield University. Tax day is not a real deadline for you in that case. You have three years to file before the statute of limitations runs out on your refund.
- Avoid Tax Refund Prepaid Cards: This isn’t really a tip for how to use this year’s tax refund but rather how to receive it. Many tax preparers and some states offer to disburse tax refunds via prepaid card, but prepaid cards often charge a variety of small fees that can eat away at your money over time if you’re not careful. If possible, direct deposit to a bank account is the way to go.
- Pay Off Debt: While no one wants to live with the increased cost and stress of unnecessary debt, far too many of us are dangerously overleveraged. “If you have more credit card debt than one month’s gross income, you are over-leveraged,” said Barbara Neuby, a professor of political science at Kennesaw State University. “One should never use credit cards to live on a day-to-day basis. If one is doing so, then one is in a crisis.”
The most strategic way to pay off debts is to pay only the minimum required amount on all but the balance with the highest interest rate, which will get the lion’s share of your debt-repayment budget. Once your most expensive debt is gone, repeat the process until you’re debt-free. Credit card companies are currently offering 0% introductory interest rates for as long as 21 months, which means the right balance transfer credit card could become quite the asset in your pursuit of debt freedom.
- Invest It: Whether it’s making an IRA contribution, adding to a 529 College Savings Plan to or further diversifying your stock portfolio, there are plenty of sound investments to be made these days.
“For those with a long-term investment outlook, a diversified portfolio of equity and debt securities with little turnover is likely to be a wise choice,” said Ron Christner, an associate professor of finance at Loyola University. “Nobody can time the market.” You can also invest in yourself through continuing-education classes, perhaps even one on money management. You can see how big of a need this is by taking our WalletLiteracy Quiz
- Reevaluate Withholdings: Getting a refund isn’t always a good thing. It can actually be a sign that you’re overpaying taxes during the year and thus giving the government an interest-free loan. That can cost you potential investment returns in the meantime.
With that being said, the manner in which you approach this reality ultimately depends on how careful you want to be in your dealings with the IRS. “Personally, as a risk-averse accountant, I instruct my employer to withhold a little more in taxes during the year than I expect to owe so that I have a ‘cushion’ when I file my return,” said Kirsten A. Cook, an assistant professor of accounting at Texas Tech University.
The tips above are peppered with expert insights, but if you’re interested in additional guidance from tax professors and professionals, we’ve got that, too. We posed the following questions to a panel of leading tax experts, and you can check out their bios and responses below
- Do you have any tips for people scrambling to finish their taxes at the last minute? Does one have to pay for reliable tax help, especially at the last minute?
- What are the biggest clerical mistakes that people make with regard to their taxes?
- Do you have any organization tips/strategies that people can try out next year?
- Should people really be happy about receiving a refund, considering that it means they overpaid in the first place?
- What’s the best way to avoid an audit?
- How should people prepare for potential tax-policy changes in the next few years?
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Kirsten A. Cook Assistant Professor of Accounting at Texas Tech University, Rawls College of Business
Wayne Tanna Professor of Taxation at the Chaminade University of Honolulu
Jeffrey A. Cooper Professor of Law at the Quinnipiac University School of Law
Ahmed M. Ebrahim Associate Professor of Accounting in the School of Business at Fairfield University
Bobby Dexter Professor of Law in the Fowler School of Law at Chapman University,
Brigitte W. Muehlmann Associate Professor of Accounting at Babson College
Wilton Hyman Professor of Law at New England School of Law
Andrew Pike Professor of Law at American University’s Washington College of Law
Linda Galler Professor, Maurice A. Deane School of Law at Hofstra University
Elaine Luther Professor of Business Management in the School of Business at Point Park University
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? Organize your tax documents before you begin to prepare your return. Make sure that you have handy any W-2s from your employers; 1099s from your banks and brokerages; and statements documenting student loan interest, mortgage interest, property taxes, charitable contributions, etc. For married couples, even if one spouse will prepare the return, both spouses should be involved in organizing the couple’s tax documents to ensure that nothing is overlooked or forgotten. If there’s too much work to do and not enough time to do it before the filing deadline, taxpayers may obtain a 6-month extension by filing Form 4868. However, while filing an extension does excuse taxpayers from penalties for failing to file a return during this 6-month window, it does not excuse them from penalties for failing to pay any tax owed. Thus, before filing an extension, taxpayers should estimate any taxes that they owe and submit a check along with the extension. Does one have to pay for reliable tax help, especially at the last minute? Lower-income taxpayers may obtain free help via the Volunteer Income Tax Assistance (VITA) program, and elderly taxpayers may receive free help via the Tax Counseling for the Elderly (TCE) program; these taxpayers may use this link to find nearby VITA and TCE centers. For everyone else, the IRS website contains numerous publications that taxpayers may find helpful when preparing their tax returns. Before hiring a paid tax-return preparer, taxpayers should weigh the costs of this strategy (that is, the tax-return preparation fee) against the benefits (that is, time savings and stress reduction). What are the biggest clerical mistakes that people make with regard to their taxes? Omitting an item from the tax return is a common mistake. Omitting income (for example, forgetting to include interest from a bank account or dividends from a brokerage account) will reduce taxes, but these are mistakes that the IRS will certainly notice, resulting in a letter demanding additional tax be paid. Omitting deductions (for example, medical expenses, charitable contributions, and unreimbursed employee expenses) will increase taxes, and these are mistakes that the IRS will not catch. Thus, spending time to gather all relevant tax documents before preparing the return will reduce the likelihood of these mistakes. Do you have any organization tips/strategies that people can try out next year? The answer differs for employees and self-employed taxpayers. For employees whose income is reported to them on W-2s and 1099s, most of these documents will arrive in the mail (or via e-mail) during January or early February of 2016. So, during halftime of your favorite football team’s bowl game, start a folder to store tax documents as they arrive. Also place in this folder any tax documents (for example, receipts from charitable organizations) received during 2015. For self-employed taxpayers (particularly small business owners), be careful to save all receipts and bank statements to justify the business-related income and deductions that you will report on your 2015 tax return. Keeping these documents together and organized during 2015 will make tax preparation in early 2016 easier (if the taxpayer prepares his or her own return) and less expensive (if the taxpayer hires a tax-return preparer). Should people really be happy about receiving a refund, considering that it means they overpaid in the first place? The answer to this question depends on the risk aversion of the taxpayer. Personally, as a risk-averse accountant, I instruct my employer to withhold a little more in taxes during the year than I expect to owe so that I have a “cushion” when I file my return. Self-employed taxpayers may implement this same strategy by making slightly larger quarterly estimated tax payments. This strategy ensures that I will not owe an underpayment penalty when I file my tax return. However, if a taxpayer receives a large tax refund, such a refund indicates that the taxpayer has made an interest-free loan to the government. Knowing this, the taxpayer may prefer to reduce paycheck withholdings and have that money available for consumption of goods and services during the year or invest that money in stocks or bonds that generate a return on the investment rather than allowing the government to use that money for free. What’s the best way to avoid an audit? The IRS uses statistical models to select tax returns for audit based on the likelihood that those returns contain errors, particularly errors that result in the collection of additional taxes. While no one outside the IRS knows the precise details of these statistical models, we do know that certain characteristics are more likely to generate an audit. For example, higher income taxpayers are more likely to be audited than lower income taxpayers. Taxpayers who itemize their deductions (medical expenses, state income taxes, property taxes, mortgage interest, charitable contributions, etc.) are more likely to be audited than taxpayers who claim the standard deduction. Generally, these are not characteristics that a taxpayer can alter. Thus, in my opinion, the best way to avoid an audit is to report income and deductions honestly. Do not understate income or overstate deductions. Doing so not only requires payment of additional taxes but also subjects the taxpayer to monetary interest and penalties and, under certain circumstances like fraud, fines and even prison. Wayne Tanna Professor of Taxation at the Chaminade University of Honolulu 
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? First, get organized. Collect your tax forms before you start entering info into you tax form. Take care of the big things and the little things will take care of themselves. The following is what the IRS recommends taxpayers using the free tax assistance provided by the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) bring with them. This list is a good starting point for those using paid preparers as well as those bold enough to attempt to do it themselves.
- Proof of identification (photo ID)
- Social Security cards for you, your spouse and dependents
- An Individual Taxpayer Identification Number (ITIN) assignment letter may be substituted for you, your spouse and your dependents if you do not have a Social Security number
- Proof of foreign status, if applying for an ITIN
- Birth dates for you, your spouse and dependents on the tax return
- Wage and earning statements (Form W-2, W-2G, 1099-R,1099-Misc) from all employers
- Interest and dividend statements from banks (Forms 1099)
- All Forms 1095, Health Insurance Statements
- Health Insurance Exemption Certificate, if received
- A copy of last year’s federal and state returns, if available
- Proof of bank account routing and account numbers for direct deposit such as a blank check
- To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms
- Total paid for daycare provider and the daycare provider's tax identifying number such as their Social Security number or business Employer Identification Number
- Forms 1095-A, B or C, Affordable Health Care Statements
- Copies of income transcripts from IRS and state, if applicable
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? There are a number of inexpensive software products, from companies such as such as TurboTax and H&R Block that are relatively simply to navigate. These companies have free versions and online versions that may be appropriate for many taxpayers. Does one have to pay for reliable tax help, especially at the last minute? Many of the popular software packages are relatively inexpensive, or even free, depending on how sophisticated a taxpayer’s needs. There is also free assistance available to qualifying taxpayers through programs such as the Volunteer Income Tax Assistance (VITA) program and the Tax Counseling for the Elderly (TCE) program. Local libraries can often provide information about these free programs. What are the biggest clerical mistakes that people make with regard to their taxes? People who do their taxes by hand often make simple mathematical mistakes. Computer software programs help avoid these errors. In addition, many taxpayers forget to properly record all of the information reported to them on tax forms such as W-2s, and 1099s. A simply error in copying the data from one of those forms into your tax return can result in an audit. Do you have any organization tips/strategies that people can try out next year? The best advice is to keep track of tax information as it comes in during the year. I keep a file for the current year’s taxes in which I record information about tax-related items -- such as charitable deductions, tax payments, medical expenses and business expenses -- as they occur throughout the year. This way I will not have to scramble to find that information when I need it next April. Should people really be happy about receiving a refund, considering that it means they overpaid in the first place? A refund often means you paid too much in tax withholding during the year and in essence gave the government an interest-free loan during the year. Since too little withholding can result in large penalties, there is nothing wrong with withholding a little extra to guard against that possibility. But taxpayers who are receiving very large refunds should revisit their withholding elections to see if an adjustment is warranted. What’s the best way to avoid an audit? The best way to avoid an audit is to avoid clerical errors — be sure your math is free of errors and be sure you have properly recorded all of the information reported to you on tax forms such as W-2s, and 1099s. Sometimes, taxpayers get audited for reasons they cannot control — such as very large deductions, or complicated business interests. In these cases, the best advice is to make sure you have filed an accurate return and kept adequate records to substantiate your tax information. If you do so, any audit is likely to be a relatively painless affair. Ahmed M. Ebrahim Associate Professor of Accounting in the School of Business at Fairfield University 
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? If you know that you will get a refund as usual every year, relax…April 15 is not a deadline for you. If you are fine with receiving your refund cash late, you will be able to file any time after April 15 without even filing for extension. However, if deep in your heart you know that you will owe the IRS, and you are not ready to file and pay by April 15, you better file for six months extension until you put your documents and information together. Notice that the extension is for filing, but not for paying. Your annual tax preparer can file the extension for you and calculate the estimated tax payment that should go with it. If you don’t have a tax preparer, you can file the extension and make the payment on the IRS site. Does one have to pay for reliable tax help, especially at the last minute? In addition to death, one of the very few absolute facts in our life is that tax is complicated. Therefore, if you prepare and file your own taxes, there is a good chance you will either miss some credits of tax benefits you are entitled to, or make some mistake that you might have to pay for it later with additional penalty and interest. So, depending on how material your income and tax obligations are, paying for a reliable tax help could be a justified investment. What are the biggest clerical mistakes that people make with regard to their taxes? Among the famous and most common ones are:
- Some taxpayers who receive Form 1099-MISC instead of the traditional W-2 form don’t recognize that – as private contractors - they are self-employed and running their own business. Therefore, the number in box 7 of Form 1099-MISC is not their taxable income. Like any business, they can take all expenses related to generating that gross revenue as deductions. It can even lead to reporting a net loss from that business if that is the case.
- Taxpayers who live in a state other than the state where they work (i.e., a taxpayer who lives in NJ but works in NY) need to file two state returns; one as resident and the other as nonresident. In the tax return of the state of residence (NJ in our case), they are entitled to claim a credit for taxes paid to the state of work (NY). Often time, taxpayers neglect to claim this credit.
- Some taxpayers who make energy-saving investments - either in their homes or by buying a hybrid or electric car - are not aware of the tax credits that come with such investment. Some of these credits (i.e., installing solar panels on your roof) can be very generous.
- If you have retirement plan with the employer, make the maximum contributions allowed before tax. If you or the spouse do not have retirement plan with employer, consider opening an IRA and making the maximum contribution allowed for the year.
- Consider switching your health insurance plan into a high deductible one with a Health Savings Account (HSA) and make the maximum contribution allowed to the HSA for the year. That can save you on both your net health care expenses and your income tax liability.
- If you are a self-employed sole proprietorship without SEP retirement account, ask your tax consultant about opening a SEP and the maximum you can contribute to it every year. In addition, consult with your tax professional about the chances of taxing your self-employment business as S-Corporation. They should be able to guide you through the process.
- Claiming “very generous” charitable contribution deductions as part of the itemized deductions in Schedule A,
- Claiming extremely high deductions for job-related expenses not reimbursed by the employer (in Form 2106) as part of the itemized deductions,
- Consistently claiming losses from a business or rental property year after year,
- Claiming deductions for home office expenses.
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? I would encourage individuals to gather together and organize the documents they will need (W-2s, Forms 1099, mortgage interest documents, property tax records, charitable contribution records, etc.), set aside a specific time during which they will not to be interrupted or distracted, and commit to finishing both their federal and state income tax returns in one sitting. They should also set aside time to check their work. Once they're done, they should sign and date their returns, get copies of the returns for their personal records, and proceed with filing. Does one have to pay for reliable tax help, especially at the last minute? A lot depends on the complexity of the return. If someone is preparing to file an "EZ" return, they probably don't have to pay someone (assuming the filer is good at following basic instructions). If a person's financial profile is more complicated or they're dealing with a special situation (e.g., filing part-year returns in two states after earning income in both after a move), then it might be best to get some assistance from a tax preparation professional. What are the biggest clerical mistakes that people make with regard to their taxes? For those completing their own returns, I would assume that math errors dominate, but it's also true that a number of people forget to sign and date their returns. Do you have any organization tips/strategies that people can try out next year? Keep a file (for each year) in a designated place and keep all tax records there. The records should be put there immediately upon receipt. A number of important records will arrive in January, but other relevant documents may arrive at different times during the year. Should people really be happy about receiving a refund, considering that it means they overpaid in the first place? Some people allow (or request) over withholding to produce a large refund or avoid having a tax liability, so I assume they're pretty happy when they get their lump sum. I, personally, believe in withholdings accurate to the dime! You should also bear in mind that in some instances, a refund arrives not because someone has paid too much but because they are the beneficiary of a refundable tax credit. What’s the best way to avoid an audit? There's really no best way to avoid an audit. It's somewhat of a lottery. I would suggest filing returns on a regular and consistent basis and making sure that the numbers on your return match information that will be reported to the taxing authorities by third parties. If, for example, your mortgage interest numbers don't match the numbers reported by the financial institution receiving the payments, the IRS's computers will not be happy. Brigitte W. Muehlmann Associate Professor of Accounting at Babson College 
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? There are many ways. By now, a taxpayer has received or has electronic access to all the documents needed to complete the tax return. One I find to be effective is to organize a binder/folder with tabs that follows the layout of Form 1040, the tax return with multiple tabs in case the taxpayer needs to complete an additional Schedule, e.g., the applicable categories on Schedule A, provided the taxpayer itemizes deduction. This can be a paper system or electronic folders in which the taxpayer files electronically. Does one have to pay for reliable tax help, especially at the last minute? This decision will depend on the complexity of the taxpayer’s facts as well as on the taxpayer’s available time and state of mind. Software is a great help these days as long as the taxpayer (1) does not need technical expert advice on reporting alternatives, (2) has sufficient time to follow the guidance provided by a tax software system and (3) is in a sufficiently calm state of mind. What are the biggest clerical mistakes that people make with regard to their taxes? As long as people completed tax returns manually, one of the big issues used to be sub-totals. Now it is just adding up amounts for a single line item on the tax return. Do you have any organization tips/strategies that people can try out next year? Set up the binder/folder system mentioned above at the beginning of the year and file tax-relevant documents under the respective categories. Should people really be happy about receiving a refund, considering that it means they overpaid in the first place? Ideally, the estimated payments during the year add up to the total amount of tax owed for the year. Penalties are to be avoided in any case. What’s the best way to avoid an audit? The IRS utilizes a system for its selection of tax returns for audit that integrates several artificial intelligence techniques. It enables the IRS to recognize and detect patterns from very large and complex data fields. A common belief among taxpayers is that filing a manual tax return is an effective strategy to avoid selection for an audit. This is a misconception, because IRS employees manually enter the data from these tax returns into the IRS database. Therefore, the data ends up in the same place. It just costs more to get it there. Wilton Hyman Professor of Law at New England School of Law 
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? The most important thing is to be organized, to properly and completely fill out their tax forms, and to avoid errors. Taxpayers should use a tax software program such as TurboTax, or some other computer-aided tax filing software. The benefit of tax software programs is that the programs instruct the taxpayer on how to fill out the tax forms, requesting the relevant information, and provide feedback that notifies you as to whether an error has been made. The software also updates you as to when the forms have been completed and on your overall progress in completing your tax return. In addition to purchasing tax preparation software, the IRS website also offers free tax preparation and e-file software to individuals, based on their income level. Taxpayers who simply do not have enough time to get their taxes done in time should consider requesting an Automatic Extension to File their tax return. Does one have to pay for reliable tax help, especially at the last minute? The best advice for someone who is seeking tax help is to ask friends, family members, or co-workers who do they rely upon for tax assistance. The best means of finding reliable tax assistance is by a referral from a satisfied client of a quality tax professional or tax preparation firm. In addition to referrals from trusted sources, taxpayers can also receive free tax assistance from the Volunteer Income Tax Assistance (VITA) program and from the Tax Counseling for the Elderly (TCE) program. Do you have any organization tips/strategies that people can try out next year? The best advice is to think of your tax preparation efforts as an ongoing, year-round effort, as opposed to waiting until the end of the year or until the spring season to begin planning for it. Taxpayers should be mindful of keeping receipts, documents and other tax-related forms in a secure, but convenient location so that they can keep tax-related papers, forms and other items together. The degree to which this effort will really make a difference to a person depends upon how straightforward or complex their tax situation is from year to year. The tax return for a single individual with no children who typically takes the standard deduction and does not have a home mortgage loan is going to be very different from that of a small business owner who operates as a sole proprietorship, or that of a married couple with several kids, a home mortgage, and realized capital gains or capital losses during the year. Proper tax planning requires that you look back at what has happened over the past year or years to determine areas in which tax or financial planning could bring about more desirable tax or financial outcomes. It also requires taxpayers, to the extent they are able to look ahead to try to anticipate what is likely to occur, if at all possible, to plan ahead for future events or situations, with some consideration of the tax impact of those future events. Should people really be happy about receiving a refund, considering that it means they overpaid in the first place? The best way to think of a tax refund is as a tax-free loan to the U.S. Government. To the extent that too much income is being withheld from your salary, you are allowing the Government to use that money, without any obligation to compensate you for the time that you were unable to use that money during the year. Many people look at tax refunds as “Christmas in April,” or May, June, or July, whenever they receive their refund check. For taxpayers who owe taxes on their tax return, to the extent they have under-withheld, they basically have a tax-free loan from the Government since they kept more than they should have over the course of the year. Andrew Pike Professor of Law at American University’s Washington College of Law 
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? Taxpayers can use some of the best tax filing software at the best price – free!! Information is available on the IRS website. This gives taxpayers information on how to access the software for free if they have income of less than $58,000. Use of this type of software helps taxpayers through the process of preparing their tax returns. Does one have to pay for reliable tax help, especially at the last minute? Not at all. In addition, there are many volunteer tax preparation groups organized as VITA (Volunteer Income Tax Assistance) sites. Many tax and accounting professionals, law students and business school students are trained and volunteer at these sites. Given the date, the lines are likely to be longish. Unfortunately, nothing can be done about that. What are the biggest clerical mistakes that people make with regard to their taxes? Use of tax software helps avoiding making mistakes. For low and moderate income taxpayers, the most difficult problem is complying with some of the technical requirements of provisions such as the earned-income tax credit. For many others, they have not kept the records needed to enter information needed to complete their tax returns completely. For example, many taxpayers who can itemize their tax returns do not keep track of all of their small contributions to charities. Should people really be happy about receiving a refund, considering that it means they overpaid in the first place? As someone who was trained in economics, I know that it is irrational to have taxes overwithheld and then receive a tax refund in the spring. It is more rational to adjust withholding and invest the difference. Unfortunately, not everyone does the economically rational act. Including me. It takes time to determine the optimal withholding amounts, particularly when there are two working spouses and income levels are not always predictable. And I really enjoy getting a refund – it feels like a great big present from the government, even though I know that it’s my money. What’s the best way to avoid an audit? Three possibilities:
- Have your return prepared at a VITA site or use commercial tax preparation software.
- Follow the instructions from the VITA folks or the software.
- Do not think of your tax return as a first offer to the government.
For people who are scrambling to finish their taxes at the last minute, what’s the most efficient way to go about it? If you qualify, there are several excellent options for free help in filing your tax return. These include:
- The IRS offers free e-filing through its web site. Go to IRS.gov and search for “free file.” If your income is below $58,000, the IRS will link you to free filing software. If your income is above $58,000, the web site will help you find tax forms that you will have to fill out yourself.
- Several companies that sell tax filing software offer free or low cost versions. These programs offer help and guidance, and answer basic questions.
- Volunteers are now staffing centers throughout the country under the auspices of the IRS-sponsored programs. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people with incomes below $52,000, persons with disabilities, the elderly and taxpayers with limited English speaking ability. Volunteers are IRS-certified and will provide free basic income tax return preparation with electronic filing to qualified individuals. Centers are often located at universities and law schools, such as my own (Maurice A. Deane School of Law at Hofstra University on Long Island), and local libraries. In addition to VITA, the Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older, and specializes in questions about pensions and retirement-related issues unique to seniors. These centers, which are also fully staffed by IRS-certified volunteers, are commonly sponsored by AARP. Taxpayers can locate VITA and TCE centers on the IRS website.
- Finally, while not free, there are many reputable tax preparers who charge reasonable fees for their assistance. It is always a good idea to ask the return preparer what his or her experience is. Do not sign a return or authorize e-filing unless the return preparer’s own number, called a PTIN (Preparer Tax Identification Number), is included in the return.
Do you have any tips for people scrambling to finish their taxes at the last minute? Start with a copy of your return from the previous year. You can use that return as a guide to ensure that you didn’t miss any items that might apply to you. Then you can start sorting and organizing your official tax information forms; W-2’s, 1099’s, etc. If you do this right now, you still will have time to track down missing items. Plus, it is better to do the organization of papers on one day and the actual tax prep on another one. Then you can start list of expenses if you itemize. Go through checkbook, credit card statements, and receipts and separate amounts into categories. You can also print out 2 copies of blank tax forms from the IRS website, if you are planning to do them yourself. Don’t forget your state and local tax forms as well. Or you will have the files you will need to present to a tax preparer. Does one have to pay for reliable tax help, especially at the last minute? If you don’t have a friend or family member who can help you, you will probably have to pay, unless you have a simple form or are a low-income taxpayer. Then you could take advantage of nonprofits who prepare taxes for free, such as VITA. Or if you are tax savvy, you could try some of the free tax preparation software options online. What are the biggest clerical mistakes that people make with regard to their taxes? According to recent statistics, the biggest mistakes are: incorrect SSN’s, math errors, and forgetting to sign the return. More costly mistakes come from not reporting all the income that has been reported to you and to the IRS on information returns. Make sure that all the numbers match. Do you have any organization tips/strategies that people can try out next year? Many people use Excel to track their expenses during the year. But a low tech method is to use an accordion file for each tax year, and use it to accumulate all documents related to your taxes. Then you can periodically sort them into relevant sections, and make lists of items. You could also end this year’s tax season by making a list of all the forms and items you needed to complete your taxes, and then use that as a reference for next year. If you have specific items, like the need to track mileage or other business expenses, there are some great apps for smartphones that you could use. Should people really be happy about receiving a refund, considering that it means they overpaid in the first place? I advise my students to not plan for a refund. Instead, they should work with their payroll department to adjust their withholdings so that they receive that money throughout the year. They could have it automatically deposited to a savings account, if they still needed discipline to save money. There are two main reasons for this; a) In recent years, for various reasons, the IRS has delayed sending out refunds. This year, the reason given was to mitigate fraudulent activity, and b) Receiving a large refund is more likely to trigger an audit, although the likelihood is still small, since other items, such as income level, running a small business, and having a home office deduction are more closely scrutinized. What’s the best way to avoid an audit? Here are several rules for avoiding an audit:
- Be average. Deductions and other items that are outside the norm draw attention.
- Accurately Report Information Return Items. This includes W-2’s, 1099’s, and any official tax reports from financial organizations.
- Be honest. Don’t hide income or exaggerate deductions.
- Follow the rules. I know they are complex, but they are important.
- Elimination of itemized deductions for state and local taxes.
- Elimination of itemized deductions for mortgage interest.
- Elimination of the $4,050 deduction for exemptions.
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