3 Money-Saving Tax Tips Everyone Should Know

Tax errors can cost you a lot of money (plus substantive delays) in getting a tax refund. While you're not expected to be a tax expert, there are some easy strategies you can use to save money on your taxes. Then you can use that extra money for fun, or roll it directly into your retirement savings. Here are 3 tips to reduce the amount of taxes you owe, and to make it easy come tax day.

1. File Your Taxes Properly

File your W-2 before the due date to avoid any late-filing troubles. Collect all records concerning your finances and proof of payment weeks or months in advance of April 15. It will give you plenty time to check your entries and determine the amount of taxes you have to pay. The IRS also charges failure-to-file penalty plus interest. So if you think you cannot file on time, apply for an extension before the deadline. You should also review your return for common errors. It will help you avoid processing delays due to incomplete or wrong entries. Check if you have entered your current status because it has a huge effect on the computation of your standard deductions. Additionally, you must also make your handwriting legible when it comes to information like your name, Social Security Number, and routing details for your tax refunds.

2. File Your Taxes Electronically

E-filing or transmitting your tax returns electronically to the IRS guarantees accurate processing compared to paper return filing. It is also easier to meet the deadline due to its electronic postmark that records the exact date and time the IRS host system receives your e-file. Other e-filing advantages include the following: It corrects tax form entries: Your tax software can help you make the necessary corrections in your e-file and you can also expect faster processing time for your tax refunds. It helps in tax computation: If you’re not good in math, you don’t have to worry about erroneous computations anymore as long as you choose e-filing instead of paper return. Simply enter the right figures and the tax software will automatically calculate your entries. In this way, you will not be indebted to IRS and you will also avoid paying interest due to erroneous computation.

3. Choose the Correct Tax Form

The simpler the form, the better. But choosing the wrong form can result in overpayment of taxes or underpayment which can result to penalties. The three most common tax forms include: 1040: This form is suitable for individual tax payers with:

• Minimum income worth $100,000
• Other types of earnings from self-employment, partnership, estate, trust, nontaxable distribution and unreported tips
• Unpaid household employment taxes for his/her household employees
• Itemized deduction
• Claimed tax credits
• Claimed income adjustments

This long form helps you put together a detailed report of capital gains and losses, distribution tax, iteimized deductions and tax credits. Finally, Form 1040 helps you identify the amount of taxes due and your eligibility for a tax refund. 1040A: This short form is a simpler version of 1040 for individual taxpayers who used to have no dependent but now have dependents. It is also suitable for taxpayers with:rno Less than $100,000 taxable incomerno No itemized deductionrno Credit payments for advanced earned incomerno Taxes due to recaptured education creditsrno Alternative minimum taxrno Income adjustments due to deductions like education expenses and IRA. People who derive income from wages/salaries, fellowship grants, annuities, IRAs, unemployment compensation, ordinary dividends, annuities and taxable scholarships can use this form. 1040A allows you to report your standard income for the tax period. Though you cannot claim itemized deductions, you can still claim standard deductions for the tax year. 1040EZ: Determines your tax obligation and your entitlement to a refund. You can use this form if you and your spouse are less than 65 years old and your income comes from fellowship grants or taxable scholarship, salaries/wages, unemployment compensation. If you are a first time tax payer or you have an uncomplicated tax situation, this form is meant for you. Advantages:

• It is shorter than 1040
• You can avail of tax deductions and standard credits

Disadvantages: You cannot claim the following:

• Tax credit adjustments
• Income tax adjustments
• Only earned income credits can be claimed under the itemized deductions.

Minimizing your taxes is one of the best personal finance tips you can use. Filing early, electronically and using the correct forms will help expedite your tax filing -- and save you money. And as always, consult a tax expert for more information.