Tax Tips: Expert offers advice on finding all the tax breaks you can
POSTED: Thursday, April 12, 2012 - 12:15pm
UPDATED: Thursday, April 12, 2012 - 12:19pm
NBC NATIONAL NEWS — There’s just over a week until taxes are due. So as you’re crunching the numbers, make sure you take advantage of all the breaks you can.
"You've got to figure out a way to minimize your tax liability," said Vera Gibbons, a TurboTax Contributor.
A deduction will reduce the amount of income that will be taxed, while a credit will cut your tax bill down dollar for dollar.
Every year, people miss out on billions of dollars in credits and deductions, Gibbons said.
"Among the deductions that people tend to miss, the out-of-pocket charitable contributions such as mileage to and from your philanthropic endeavors," Gibbons said. "Moving expenses if you had to move for a new job, for example, and job-hunting expenses."
Of course, if after you file your taxes you realize you've missed some of those breaks, you can file an amended return. But Gibbons said that just causes a lot more work.
Instead, get organized now so you won't have the same problem next year.
"Have a system. Have your folders ready to go," Gibbons said. "Your folders for your income, your folders for your deductions. If you got hit with a large bill this year, you've got to start stockpiling."
And if you have to pay a large amount of money this year, pay as much as you can by April 17, then work with the government to set up an installment plan.
"That's the best way to go, versus paying for everything on your credit card, because it's going to be based on your income, not based on how much you actually owe," Gibbons said.
You could also have your employer pull more money out each pay check to help cut down your tax bill.
But try not to overpay because you won't get a refund.
"You're basically giving the government an interest free loan and they'll apply any over payment you've made to the following year,” Gibbons said.
But the truth is most Americans will be getting a refund.
"Three out of four taxpayers are getting a refund," Gibbons said. "The average refund is about $3,000."
So if you haven't filed, you're in luck. There are a couple extra days this year - taxes aren't due until Tuesday, April 17.