Sherri Richards, Published February 20 2014
5 things to think about as tax time rolls aroundFARGO – The W2s and interest statements have arrived. It’s tax time.
Here are five things to think about as April 15 rolls around.
1. There are several ways to file your federal income tax return for free. Visit www.freefile.irs.gov to check out your options.
The North Dakota Tax Department has a handy chart on its website for state residents to determine which options work for them. Go to www.nd.gov/tax, click on “Fillable Forms” and then click the link for “Free File Opportunities.”
2. Deductions and tax credits can save taxpayers thousands of dollars, but they’re often missed.
Jackson Hewitt lists on its website the 50 top overlooked tax deductions. They include (among many more) student loan interest, alimony paid, medical transportation, points paid on mortgage or refinancing, property donated to a recognized charity and job-related journals, magazines and newspapers.
You may be eligible for the Child and Dependent Care Credit if you paid someone to care for your child while you worked or looked for work.
Credits and deductions aren’t just at the federal level. For example, North Dakota residents (married, filing jointly) can deduct up to $10,000 from their state taxable income for contributions to a College SAVE plan.
3. It’s a good idea to hold on to your tax returns and supporting documents for at least three years, according to an H&R Block blog post. That’s the statute of limitations for an IRS audit.
Some records, including bad debt deductions, should be kept for seven years.
If you file a fraudulent return, the statute of limitation never expires, so you’d need to keep those records indefinitely. (Better idea, don’t cheat the IRS.)
4. You might think of that refund check as a bonus, but in reality, you’ve just given an interest-free loan to Uncle Sam. You could have had more money in your paycheck all year long.
If you’re getting a large refund, consider adjusting your withholding amount on your W-4. Just ask your employer for a new form.
Life changes can lower or increase your taxes. Turbo Tax suggests revising your W-4 withholding when you get married or divorced, add a baby, get a second job or if your spouse gets or changes a job.
5. It’s not too late to contribute to last year’s Individual Retirement Account limits.
The maximum contribution amount to a traditional or Roth IRA for people age 49 and younger is $5,500 a year, $6,500 for ages 50 and older.
That assumes you earn at least that much in taxable compensation, and don’t exceed income thresholds to contribute to an IRA.
The deadline for contributing to your 2013 limit is April 15, 2014. If you contribute to last year’s limit first, and after April 15, to the 2014 limit, you can stash more cash for retirement this calendar year.
Readers can reach Forum reporter
Sherri Richards at (701) 241-5556