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5 Things Tax Preparers Wish You Knew About Taxes

Tax preparation items including a pencil, calculator and tax forms
Less than two months remain before the IRS's income tax filing deadline, and taxpayers across the United States are scrambling to compile receipts, deductions, charity giving and, of course, income statements. Since the ides of April can strike fear into even the most organized taxpayer, we asked accountants and other tax professionals to share their insights for easing the pain of tax time.

1. Don't Try to Deduct Your Grown Children

Is your post-college child living at home while job searching? Odds are they won't count as a dependent. "Your idea of supporting your adult child is different than the IRS's idea," says Kristin Roberts of the Roberts Tax Group in Torrington, Conn. "Many parents who have adult children living with them say, 'He lives with me. I pay the rent. I support him. I can claim him.' But that's not so in most cases."

Explains Anabella D. Hampton, president and CEO of TBRE Consulting Co. in Oxford, Pa.: "If your child is 19 or over years old and does not go to school or goes less than half time, but works at a grocery store and made $4,000 last year, you cannot claim him as a dependent, even though you feed him and put a roof over his head."

2. Keep it Truthful

"When you ask a licensed tax professional to prepare your tax return, they are swearing that, to the best of their knowledge, their client has told them the truth," says Rhonda A. Mannes, a certified public accountant in Las Vegas, N.M. "Please do not ask us to lie for you. The IRS will impose penalties and in some cases bar us from preparing tax returns in the future. This is our livelihood, and we are not willing to risk it."

"There is no accountant or tax preparer/client privilege when it comes to the IRS," says Scott Patterson, a certified financial planner in Anderson, S.C. "If you don't want me to know, keep your mouth shut."

3. Forget About the Joneses

"Don't compare refunds with your friends," says Roberts. "I hear often "I make the same as my friend. Why is his/her refund bigger than mine?" Refunds are indications of nothing. They often try to use refund amounts as a way to gauge how "bad" they have it compared to their friends. But it is really like comparing apples to freight trains."

"No, your tax situation is not 'just like' your friends'," says Patterson. "Tax law is complicated, and every situation is unique. Stop trying to keep up with the Joneses."

4. Leave Your Retirement Accounts Alone

Feeling a financial pinch? It might be tempting to dip into retirement funds, but Hampton says that short-term solution could have longer-term consequences.

"If you take money out of your 401k or IRA, and are under 59½, you will be stuck with a 10 percent penalty, and it may put you into a different tax bracket," she says. "I can't tell you how many people do this, and then are shocked to find out they owe half of what they took out in taxes between federal and state.

5. Know When to Get Help

"Doing it yourself [with a tax preparation software] is an option only if you have a very simple return or are willing to put in some serious time learning the tax laws that might affect you," says Dan Connors, a CPA in Granite City, Ill.

"Most returns are not easy or quick," says Patterson. "While what we do may seem like it's those things, it's truly because we're just that good. Michael Jordan makes a three-pointer look easy; Tiger Woods makes golf look easy; and I make taxes look easy. Just claiming someone as a dependent has 12 separate rules."

For those still worrying about tax season, Connors has this advice. "You can't avoid death or taxes. Don't let worrying about them rule your life. Do your best to pay your share and get on with your life and follow your dreams."

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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One thing they don't want you to know is that with a fifth grade reading level and third grade math skills, you can do it yourself. Yes that's 1040 EZ for sure. You can also do 1040, 1040A, 1040B, 1040D (form 8949 included), 1040E and save hundreds of dollars.

February 18 2014 at 9:36 PM Report abuse rate up rate down Reply

Pay your taxes honestly and no need to worry.

February 18 2014 at 2:54 PM Report abuse rate up rate down Reply
1 reply to betty_brock's comment

how does one interpret 73,000 pages of tax code?

February 19 2014 at 1:05 PM Report abuse rate up rate down Reply

can you make payment if i owe irs, iam 79 work as clerk, i drew socuity pension small pension from gm worried worried

February 18 2014 at 1:28 PM Report abuse rate up rate down Reply
1 reply to Joyce's comment

If your income plus 1/2 of your SS is less than 32K, you do not need to file.

February 18 2014 at 1:33 PM Report abuse +1 rate up rate down Reply

#2 should be titled, Please Lie to Me, lol.

February 18 2014 at 11:12 AM Report abuse rate up rate down Reply

Very Informative!

February 18 2014 at 10:57 AM Report abuse rate up rate down Reply