We are about to say good bye to the year 2016. The final months of the year also provide an opportunity to focus on year-end tax planning options available to optimise US tax for 2016. Here are some very important tax planning tips/considerations:

Deferring income and accelerating expenses:

Consider the potential benefits of deferring income receipts. For example, employees might choose to defer receipt of any 2016 year-end bonus to 2017 or those who are self-employed might be able to delay collection for payment for services and business debts until early 2017. The deferral of this income from 2016 to 2017 will postpone payment of any related tax liability from the current tax year to the next. In addition, if there is a chance that circumstances could change, such that 2017 taxable income is likely to be lower than that of 2016, then any income deferred to the 2017 year may be taxed at lower rate.

Conversely, consider opportunities to accelerate deductions or tax credits of the 2017 year into the 2016 year. For instance, for itemized deductions, making payment of mortgage interest, medical expenses, state and local taxes or other Schedule A deductible items before the end of 2016 (rather than during early 2017) will increase 2016 deductible expenses and, therefore, reduce taxable income for the year. Also, if claiming the standard deduction in one year and itemizing deductions in the other then deferring or accelerating Schedule A deductible items may enable the benefit of deductions that might otherwise be lost in a year in which the standard deduction is claimed. 

Alternatively, if circumstances are such that that the 2017 tax rate will be higher than that of 2016 (i.e. as a result of increased salary or intended sale of an asset that will result in a large gain) then consider accelerating income into 2016 and deferring payment of Schedule A deductible items to 2017, when these deductions would offset income subject to tax at higher rates than in 2016. 

Equipment Purchases for business use

If you need new equipment (e.g., computers, laptops, tablets, machinery, furniture) or merely want to replace what you currently have and you use these assets for your business, you’ll probably be able to write off the cost. This is so even if you finance the purchase in whole or in party. 

Health Savings Account:

Consider a contribution to a Health Savings Account (HSA). A HSA is a trust account into which tax-deductible contributions can be made by qualified taxpayers who have high deductible medical insurance plans. The 2016 HSA deductible contribution limits are $3,350 (single, plus $1,000 if age 55) or $6,750 (family, plus $1,000 if age 55). 

Max out 401(k) contribution:

Eligible employees can contribute upto $18,000 (or $24,000 if you’re over 50) out of their wages and save taxes. The contribution has to be done by end of 2016. Please check with your employer about their matching contributions and your tax consultant for any restrictions on the limits, if any. 

Charitable contributions:

Consider making charitable donations that also qualify for tax relief in the country of residence. Caution must be taken here as to qualify as a deduction for US tax purposes the donation must be made to charitable entities registered with the IRS as US (not foreign) qualified charitable organization. You must preserve receipt for cash contributions made for $250 or more. 

Retirement Planning: 

2016 taxable income may be further reduced by making a contribution to a traditional IRA or a SEP IRA (SEP is available to self-employed taxpayers). For 2016 a contribution of up to a maximum of $5,500 ($6,500 if age 50 or older) to a traditional IRA plan or $53,000 to a SEP IRA. Depending on the circumstances, the traditional IRA contribution may be a deductible or non-deductible.  A tax advisor can confirm availability of an IRA or SEP IRA contribution and the amount that can be contributed. It should be noted that there are potential penalties if the allowable contribution limits to an IRA plan are exceeded and the contribution is not withdrawn within prescribed time limit.

Contributions to IRS plans for 2016 can be made up to April 15, 2017.

For those reaching age 70½ during 2016 who have a qualified retirement account, IRS requires that you start taking withdrawals from such retirement plans. The Required Minimum Distributions (RMD) is the minimum amount that must be withdrawn from the account each year.

Record retention guide:

You must keep records for almost everything you report on your tax return including the expenses or deductions. Further, if you are a consultant (and not a full time employee)  and travel to project locations to work on temporary assignments (actually or realistically lasting for less than 12 months), you may be able to claim certain project related expenses. Please note that your employer must confirm that these expenses are required to be incurred by you and related to your duties under the employment agreement and none of these expenses were reimbursed to you. 

Other Considerations:

- Hold on to appreciated assets for 12 months or more prior to sale to take advantage of the lower long-term capital gains tax rate.
- Sell loss-producing assets to set against any capital gains arising during 2016. Be sure to avoid the “wash sale” rules.
- Avoid or limit penalties/interest by making estimated tax payments. Note: If 2016 tax return is not filed with the IRS within 60 days of due date of the return (including extensions for time to file) the penalty for failure to file a tax return is the lesser of $135 or 100% of the tax due.

​A few challenges to Year-End Tax Planning

- Alternative Minimum Tax (AMT)
The consideration regarding acceleration or deferral of income and/or expenses outlined above should be made with caution if subjected to Alternative Minimum Tax (AMT).  AMT is a tax levied in addition and separate to regular federal tax that may nullify the benefits of year-end planning strategies or in some cases result in negative tax consequences.

- Phase Out of Exemptions and Limitations on Deductions
The benefits of accelerating or deferring income and/or expenses may also be adversely affected by the level of adjusted gross income (AGI). Personal and dependency exemptions are phased out (gradually reduced) and itemized deductions limited once AGI reaches a certain threshold. So depending on the level of AGI the intended benefits of accelerating or deferring income and/or expenses may be reduced or nullified.

​The year-end planning considerations outlined above are complex and the related benefits are dependent on personal circumstances. Therefore a consultation should be taken by your tax consultant to discuss the available options.

There are many tax scams out there with the purpose  of stealing your identity, stealing your money, or filing fraudulent tax returns using your private information. Tax scammers work year-round, not just during tax season and target virtually everyone. Stay alert to the ways criminals pose as the IRS to trick you out of your money or personal information. The best thing to remember to protect yourself is that the IRS will never initiate contact with you via telephone, text message, email, or social media to request personal or financial information. The IRS will always first send a letter requesting information.

IRS-Impersonation Telephone Scam
An aggressive and sophisticated telephone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be employees of the IRS, but are not. These con artists can sound convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets from information gathered from online resources, and they usually alter the caller ID (caller ID spoofing) to make it look like the IRS is calling. Also, if the phone is not answered, the scammers often leave an urgent callback request. Victims are often told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation, or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Alternatively, victims may be told they have a refund due to try to trick them into sharing private financial information. You should note that the IRS will never:

• Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit, debit card, or PIN numbers over the phone.
• Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

What to do. If you receive a phone call from someone claiming to be from the IRS and asking for money, take the following steps:

• Do not provide any information to the caller. Hang up immediately.
• If you know you owe tax, or think you might owe, you should call the IRS at 1-800-829-1040 where you can get help with a payment issue.
• If you know you do not owe any tax, or have no reason to believe that you do, report the incident to TIGTA (Treasury Inspector General for Tax Administration) at 1-800-366-4484 or at www.tigta.gov.
• You should also contact the Federal Trade Commission and use the “FTC Complaint Assistant” at www.ftc.gov. When filing the complaint, add “IRS Telephone Scam” to the comments.

Phony IRS Emails —“Phishing”
Scammers copy official IRS letterhead to use in email they send to victims. Emails direct the consumer to a web link that requests personal and financial information, such as Social Security number, bank account, or credit card numbers. The practice of tricking victims into revealing private personal and financial in- formation over the internet is known as “phishing” for information. The IRS does not notify taxpayers of refunds or payments due via email. Additionally, taxpayers do not have to complete a special form or provide detailed financial information to obtain a refund. Refunds are based on information contained on the federal income tax return filed by the taxpayer. The IRS never asks people for the PIN numbers, passwords, or similar secret access information for their credit card, bank, or other financial accounts. What to do. If you receive an email from someone claiming to be from the IRS and asking for money, take the following steps:

• Do not reply to the email message.

• Do not give out your personal or financial information over email.
• Do not open any attachments or click on any of the links. They may have a malicious code that will infect your computer.
• Forward the email to the IRS at phishing@irs.gov.
• Delete the email.

Fake charities: Taxpayers should be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. Be wary of charities with names that are similar to familiar or nationally known organizations. 

Ways to Protect Yourself From Scams
There are many precautions you can take to protect yourself from becoming a victim. These include:

• Personal information should not be provided over the phone, through the mail, or on the internet unless the taxpayer initiated the contact or is sure he or she knows with whom he or she is dealing.
• Social Security cards or any documents that include your Social Security number (SSN) or individual tax- payer identification number (ITIN) should not be carried around.
• Do not give a business your SSN or ITIN just because they ask — provide it only if required.
• Financial information should be protected. Do not give out any financial information over the phone or via email.
• Credit reports should be checked yearly.
• You should review your Social Security Administration earnings statements annually.
• Protect personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for internet accounts.
• Report any instances of tax scams to the IRS.

Note: This blog contains general information for taxpayers and should not be relied upon as the only source of authority. Taxpayers should seek professional tax advice for more information.

Tax changes also complicate the annual tax filing exercise. For the 2013 tax year, some higher income taxpayers (and their tax preparers) will have to decipher the 3.8 percent tax on investment income. Don't be surprised to see this new provision make the IRS list of specific problems during the 2014 filing season.
Special tax scenarios aside, there are still plenty of ways to mess up a 1040 form. Here are 10 common mistakes that show up every tax season. Don't make them this year!

1. Math miscalculations
The most common error on tax returns, year after year, is bad math. Mistakes in arithmetic or in transferring figures from one schedule to another will get you an immediate correction notice. Math mistakes also can reduce your tax refund or result in you owing more tax than you thought.
Using a tax software program to file your return can help reduce math errors. The built-in calculators do the work for you, adding, subtracting and inserting numbers on additional forms as needed. But you still have to make sure your initial numbers are correct. Entering $3,500 when the real figure is $5,300 makes a lot of tax difference. Getting the numbers right is crucial because you can be sure the IRS will be double-checking numerical entries against its copies of your tax statements (W-2, 1099s and the like).
When IRS examiners find a discrepancy, they'll definitely let you know and, in many cases, will correct your mistake and refigure your taxes for you. Don't give them the chance. Make sure your math entries are right.

2. Computation errors
These are cousins to the standard math mistakes. In these computation cases, taxpayers or their tax pros make mistakes in figuring such tax-return entries as taxable income, withholding and estimated tax payments. Credits and special deductions also pose problems. Errors regularly show up, says the IRS, in figuring the Earned Income Credit, the taxable amount of Social Security benefits or in calculating the larger standard deduction for taxpayers who are age 65 or older or blind. A common connection in all of these errors is added worksheets or forms before the amounts are transferred to the taxpayer's Form 1040. 

3. Misspelled or different names
The IRS is all about numbers, but words, specifically names, are important, too. When the names of a taxpayer, his or her spouse or their children don't match the tax identification number that the Social Security Administration has on record, that difference will cause the IRS to kick out or slow down processing of the tax return. This often is a problem for new wives. Many women change their surnames when they marry. That's also an option for spouses in same-sex marriages, which the IRS now recognizes. If you didn't alert the Social Security Administration of your name change soon after your wedding, do so now so that your new name won't cause a problem when you file your first joint tax return. And if marital bliss doesn't last and you change your name after a divorce, make sure Uncle Sam's appropriate agencies know that, too.

4. Direct deposit dangers
Taxpayers can have a refund directly deposited into multiple bank accounts. This option is a great way to save your refund money, but the more numbers you enter on a tax form, the more chances you have to enter them incorrectly. And a wrong account or routing number could cause you to lose your refund entirely.
You can divide your refund into three accounts by filing Form 8888 along with your individual return. It's not a difficult document to complete, but if you put in wrong account numbers, your refund could end up in someone else's account or be sent back to the IRS. Either way, you might not be able to retrieve your refund because there is no IRS procedure for replacing lost electronically transferred funds.
Incorrect account numbers aren't just a problem when a refund is split multiple ways. Even if your refund is going to just one account, make very sure you enter your account and bank routing numbers correctly.

5. Additional income, additional filing work
Did you have a side job this year? If so, as a contractor you probably received a Form 1099-MISC detailing the extra earnings. What about savings and investment accounts? For these, you should have received Form 1099-INT and Form 1099 DIV statements. In each 1099 instance, the IRS knows precisely how much extra money, either as wages or unearned investment income, you made as soon as you did, thanks to the copies of your 1099 forms that went to the tax agency. If you forget to include any of these earnings on your return, the IRS examiners will let you know you owe taxes on them, too. And depending on when your oversight is discovered, you also could owe penalties and interest on the unreported earnings.

6. Filing status errors
Make sure you choose the correct filing status for your situation. You have five options, and each could make a difference in your ultimate tax bill. If this is the first tax filing season since your divorce and you now are a single parent, writing "head of household" probably will be more beneficial. And what if you're still married, but you and your spouse are thinking about filing separate tax returns? That works in some cases, but not all. Make sure you know what each tax filing status entails, and choose the one that best fits your personal and tax situation

7. Social Security number oversights
Because the IRS stopped putting taxpayer Social Security numbers on tax package labels in response to privacy concerns, some taxpayers forget to write in their identification numbers. Your tax ID number is crucial because there are so many transactions -- income statements, savings account interest, retirement plan contributions -- keyed to this number.
The nine-digit sequence also is vital to claim several tax credits, such as the child tax and additional child tax credits as well as ones for educational expenses and dependent care costs.

8. Complete charitable contributions
Did you give to charitable groups last year? All types of donations, from cash to cars, could be valuable tax deductions, so make sure you count them all when you file. Be sure to follow the donation tax rules, the most important being that you give to a qualified organization -- that is, one that has tax-exempt status with the IRS. Also be careful when calculating any gifts of clothing and household items. Tax law now requires that these donations be in good or better condition or the deduction is disallowed. And remember that the amount you can claim for donated goods is the fair market value of the items; that's what a willing buyer would pay for it in its current condition, not what you paid for it.

9. Signature required
Sign and date your return. The IRS won't process it if it's missing a John Hancock, and that means on e-filed returns, too. Taxpayers filing electronically must sign the return electronically using a personal identification number, or PIN. To verify your identity, you'll have to provide the PIN you used last year or your adjusted gross income from your previous year's tax return.
Your tax software should walk you through the e-signature process, but if you're still mailing your return, don't be in such a hurry that you stuff your 1040 in the pre-addressed IRS envelope without signing it. And if it's a joint filing, both you and your spouse must sign.

10. Missing the deadline
Millions of taxpayers put off filing until the very last minute. That's fine, as long as you do get your 1040 to the IRS by the April 15 due date. If that's just not possible, be sure to file Form 4868 to get a six-month extension. If you fail to send in your tax return or the extension request (along with any tax you owe, or a close estimate of the due amount), you could face late- or non-filing penalties. Nobody wants to pay Uncle Sam a penny more than necessary, so don't make the mistake of missing the filing or extension deadline.

 2014 has arrived, and with it a whole new year of important personal finance deadlines you’ll need to put on your calendar. The following list takes a look at a wide range of deadlines, from important  dates and IRS mailing deadlines to financial aid and student scholarship applications due dates throughout the next 12 months.  

January: Jan. 15, 2014: If you are self-employed or have other quarter four income that requires you to pay quarterly estimated taxes, be sure to have these tax forms postmarked by this date.
Jan. 31, 2014: IRS mailing deadline for a 5498 IRA form, 1099-R retirement account form with reports distributions, re-characterizations, etc., as well as a 5498-SA Health Savings Account form. It’s also the deadline for employers to mail out to employees.

February: Feb. 18, 2014: IRS mailing deadline for a 1099-B form pertaining to sales of stock, bonds or mutual funds through a brokerage account as well as a 1099-S form pertaining to real estate transactions. Also the deadline for employees who claim exemption from withholding to file a new W-4 form with their employers

March: March 17, 2014: IRS mailing deadline for non-retirement brokerage accounts holding certain real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs) and collateralized mortgage obligations (CMOs). It’s also the IRS mailing deadline for 1042-S forms for accounts held by a nonresident alien with American income earnings, and for sending a supplemental mortgage pool statement for accounts holding a mortgage pool security with 2013 tax-reporting consequences.

April: April 15, 2014: Individual tax returns are due for the tax year of 2013, as well as individual tax return extension forms if you’re looking to push back your deadline to Oct. 15, 2014. If you are self-employed or have other first-quarter incomes that requires you to pay quarterly estimated taxes, have your 1040-ES tax forms postmarked by this date. April 15, 2014, is also the deadline for making a contribution to a traditional IRA or a Roth IRA unless you have a Keogh or SEP and receive a filing extension for Oct. 15, 2014.

May: May 15, 2014: Deadline for non-profit organizations to file Form 990 for the year 2013 or to request an extension with Form 8868.

June: June 2, 2014: IRS mailing deadline for a 5498 IRA form and 5498-SA Health Savings Account if you made contributions for the 2013 tax year between Jan. 1, 2014 and April 15, 2014.

June 16, 2014: Deadline for U.S. citizens living abroad to file individual tax returns and to pay any taxes due, or to request an additional 4-month extension with Form 4868. Second quarter 2013 estimated tax payment is due for either the self-employed intent on filing taxes or those that have second-quarter incomes that require quarterly estimated taxes.

June 30, 2014: The federal deadline for 2013-2014 Free Application for Federal Student Aid (FAFSA) online applications. However, each state, along with many colleges and universities, has different financial aid application deadlines, so be sure to create a checklist for when all materials are due.

July: Many scholarship or paid internship programs have deadlines in July.

August: Many employers have open enrollment during this time in which employees can make changes to their insurance policies, as well as set up or adjust contributions to outside accounts such as Health Savings Accounts, so be sure to check with your Human Resources department for corresponding deadlines. Many colleges and universities have deadlines for varying summer semester or quarter terms, so are sure to check with specific education programs and not miss crucial payment or registration deadlines.

September: Sept. 15, 2014: Final deadline to file corporate tax returns, trust income tax returns and partnership tax returns for 2013 if an extension was requested

Sept. 16, 2014: Third quarter 2014 estimated tax payment is due for either the self-employed or those that have second-quarter incomes that requires quarterly estimated taxes. .

October: Oct. 1, 2014: Final deadline for self-employed persons or small employers to establish a SIMPLE-IRA for 2014.

Oct. 15, 2014: Extended individual tax returns are due for those who received a filing extension for their 2013 tax returns. It’s also the last chance to re characterize or undo your 2013 Roth IRA conversion if you converted a traditional IRA account to a Roth one during 2013 and paid tax on the conversion with your 2013 return.

November: There are many student financial aid deadlines that occur throughout the month, so double-check with the specific school.

December: Dec. 1, 2014: You’re eligible to contribute the full amount to a Health Savings Account for the year if you are covered by an HSA-compatible health insurance policy.

Dec. 31, 2014: Last day for self-employed persons to set up a solo 401(k) and to make any tax moves for 2014. Keep in mind the marital status listed on this date determines your marital status for the whole year.   

WASHINGTON, D.C. — It may not be the best time to say it, but the federal tax filing season is nearly upon us. The Internal Revenue Service has announced plans to open the 2014 filing season on January 31, 2014, and encourages taxpayers to use e-file or Free File as the fastest way to receive refunds.

The new opening date for individuals to file their 2013 tax returns will allow the IRS adequate time to program and test its tax processing systems. The annual process for updating IRS systems saw significant delays in October following the 16-day federal government closure. “Our teams have been working hard throughout the fall to prepare for the upcoming tax season,” IRS Acting Commissioner Danny Werfel said. “The late January opening gives us enough time to get things right with our programming, testing and systems validation. It’s a complex process, and our bottom-line goal is to provide a smooth filing and refund process for the nation’s taxpayers.”

The government closure meant the IRS had to change the original opening date from January 21 to January 31, 2014. The 2014 date is one day later than the 2013 filing season opening, which started on January 30, 2013, following January tax law changes made by Congress on January 1 under the American Taxpayer Relief Act (ATRA). The extensive set of ATRA tax changes affected many 2012 tax returns, which led to the late January opening. The IRS noted that several options are available to help taxpayers prepare for the 2014 tax season and get their refunds as easily as possible. New year-end tax planning information has been added to IRS.gov this week.

In addition, many software companies are expected to begin accepting tax returns in January and hold those returns until the IRS systems open on January 31. More details will be available in January. The IRS cautioned that it will not process any tax returns before January 31, so there is no advantage to filing on paper before the opening date. Taxpayers will receive their tax refunds much faster by using e-file or Free File with the direct deposit option.

The April 15 tax deadline is set by statute and will remain in place; however, the IRS reminds taxpayers that anyone can request an automatic six-month extension to file their tax return. The request is easily done with Form 4868, which can be filed electronically or on paper. IRS systems, applications and databases must be updated annually to reflect tax law updates, business process changes and programming updates in time for the start of the filing season.

The October closure came during the peak period for preparing IRS systems for the 2014 filing season. Programming, testing and deployment of more than 50 IRS systems is needed to handle processing of nearly 150 million tax returns. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year. About 90 percent of IRS operations were closed during the shutdown, with some major work streams closed entirely during this period, putting the IRS nearly three weeks behind its tight timetable for being ready to start the 2014 filing season. There are additional training, programming and testing demands on IRS systems this year in order to provide additional refund fraud and identity theft detection and prevention. 
Article Source :http://www.thevwindependent.com/news/2013/12/irs-tax-filing-season-to-open-jan-31/

The federal government may be a bit behind on taxes this year, but it doesn't mean everyone has to be. The first day the Internal Revenue Service will begin processing individual tax returns is Jan. 31 — later than normal this year due to the government shutdown in Fall 2013. This means many people who might be used to getting a tax return in early February will have to wait until the middle or end of February, and plan accordingly.

According to the IRS, the average wait time for a tax return is 21 days. But the sooner a tax return is filed, the sooner a refund will be issued. Waiting until closer to April 15 (the individual tax return filing deadline) can result in a delay in getting a refund, as the IRS is inundated with returns to process. Although more people expect a refund than a tax bill, what's interesting this year, according to finance coach and founder of FinancesWithFunk.com, Trisha Funk, is that for 2013 the average person expecting a return is down about 5 percent to about the same expecting to actually owe money this year that never have had to. It's usually near a 60/40 split, but this year it's estimated that the split will be more like 55/45. The majority of people can still expect a refund, but it's fewer than it has been in the past. "That could be a sign that the economy has been improving but it's definitely a shift to keep in mind and pay attention to," Funk said. Funk breaks down the filing process and how to maximize the amount of your tax return. One of the best ways to increase your return is to take advantage of tax deductions. For the purposes of this article, the focus will be on deductions for those who are single and do not have children (because deductions are few and far between for this demographic). Deductions this demographic may qualify for include:

Earned income tax credit: Of deductions that even singles with no children can take advantage of or those who have children, the earned income tax credit is probably one of the biggest ones. If you are at least 25 and have a child or even if you don’t you still may be able to qualify. The IRS has created a great resource for this credit. Find out if you qualify by using this EITC Assistant. But there are some issues to avoid when it comes to errors with the earned income tax credit:

1. Ensure proper income reporting. (That means making sure that your 1099s or W-2s actually match up with what you are reporting on your tax return.)
2. For those who are married who should be filing as married, filing separate rather than single or head of household.
3. Be sure you are claiming a qualified child and be sure that child can’t be claimed on anyone else’s taxes. (The courts may have granted rights to one parent to claim that child on their taxes and even when there is no formal agreement in place it has to be decided on ahead of time or it will send errors on both parties taxes.
4.Reporting the wrong income and reporting the wrong social security numbers are some of the biggest errors that cause people to lose out on the earned income tax credit. 

American opportunity tax credit: This credit benefits higher education costs for those with income of $80,000 or less if single or $164,000 if married filing joint. This credit is for students for the first four years of their education and students only have to be enrolled in half time credit. (That’s something to consider if you are going to school part time and taking one extra credit or so could put you at that ½ time status it would be worth seeing if you can fit it into your schedule.) 
  
Lifetime learning credit: This isn’t just secluded to those first four years and doesn’t have to be a degree-specific goal in mind. You can actually qualify for the credit based on simply being interested in learning a new skill or developing new opportunity. 

Saver’s credit: This credit is hardly ever used. Aside from awesome tax implications of putting some of your income into retirement savings and the possibility of getting employer match contributions,  if you contribute to your retirement account you could get tax credits. Income limits are $29,500 for singles, $44,250 for a head of household filing or $59,000 for married filing jointly. That means you should contribute to your 401(k), even if it’s a small amount. 

How do you find out which deductions you may be eligible for? 
Funk: One of the best resources you can possibly use is the IRS website itself. www.IRS.gov is going to give you all the different tax credits and those specific limitations and exclusions that make sure that you are within your legal rights to claim that tax credit. 

How many people do not take advantage of tax deductions? 
Funk: The majority of people don’t take deductions. Seventy percent of filers use 1040EZ or 1040A for their tax returns and taking the standard deduction. 
I think so many people just assume they won’t qualify for them. The tax code is complicated, and we naturally avoid things we don’t really understand. Also, many have no idea that these deductions actually even exist, so I don’t think for some it may be a blatant disregard. Some procrastinate on their filing so they don’t have the time to do the research or pre-planning to be able to take those deductions. 

What can be done throughout a year to qualify for tax deductions? 
Funk: One of the most important things that people can do throughout the year is to have a plan and a tracking system that works. I have a really simple strategy that works wonders and my clients use it all the time. Create a tax deduction calendar either on your Google calendar or on Outlook calendar, even a little paper pocket calendar, whatever you happen to use.  Every time you go to the doctor, just jot your copay into the calendar (along with your mileage driven there). Miles driven for charity? Write them in your calendar. College expenses? Whatever. And if you’re totally nerdy like me you can color code your entries based on what type of a deduction it is. At the end of the year just print off your month and add it all up. 
Grab a simple accordion folder to keep your receipts or be sure you have a file on your computer that you can swipe all of that documentation into. In case of an audit you want to be able to back up your medical claims. 
  
What is the best way to file taxes? Should I use free or paid online versions of e-filing software? 
Funk: Absolutely the easiest way to file taxes is to e-file. The difference between the paid or free versions really depends on the resource you are using. There are a number of free versions that are actually going to upgrade you to other things if you want them to check for other credits you might be missing. If you have really done your homework yourself and are comfortable with what you are doing, a free version may be fine. Otherwise you really need to choose a program that is going to walk you through an initial interview to find out if there are things you may qualify for.  None of these really can compare with a live Certified Public Accountant. People have this perception that having an actual CPA do your taxes costs tons of money but the reality is that the few hundred dollars you invest in them could reward you quite a bit more. They also are going to be able to give you information on areas that you were close to qualifying for or things you could do different in the future in order to take advantage of exemptions and deductions out there. 
  
When is e-filing not allowed?

Funk: E-filing is not going to be allowed if: you’re married but filing a separate return and live in a community property state; you are claiming a child who has already been claimed by someone else or you have a multiple support agreement. In any of these situations your return is going to be rejected. 

The benefits to e-filing: Funk: Your work file is processed quicker. Every paper file that the IRS gets they have to hand type it into their system. Which means you get your return quicker especially if you do automatic deposit. The other benefits of e-filing is that if you have made an error you get a notification within 24 hours that your return has been rejected so you can correct it right away and resubmit. Do your homework and make sure you have all the information correct, e-file your return, and have your refund direct deposited into your checking or savings account. 

What document should I have on hand when ready to file? 
- Vehicle license taxes from your registration bill 
- Any state taxes you paid 
- Property taxes paid if you own property 
- Any charitable contributions that you have made throughout the year 
- Some states still have a renters credit, so you need a total of the rental payments for the year 
- Any receipts or mileage related to a side business venture (even if you don’t feel like you really made any money or you know you spent more on it than you made) 
- 1099s (including those from any savings or investment accounts) 
- W-2s 
- Any mortgage interest that you paid 
- Any medical bills or expenses you paid including and especially those that insurance doesn’t cover 
- Any educational expenses 

What if I throw out my mail? 
Funk: Well first, stop doing that. I don’t care if you open it or not but quit throwing it away. Your best resource is to log on to your accounts and start looking. Go online to your bill pay and search by the specific charity, doctor’s office, or wherever and set your date range Jan. 1 – Dec. 31 if your bank or credit card company will let you. Then you can get a consolidated amount for the year. And almost 100 percent of mortgage companies, banks, investment companies and others will let you print your 1099s or other tax documentation online.

What else should I be taking advantage of or consider? 
- High deductible insurance with an HSA account 
- Utilize flex spending accounts if available through your employer 
- Commuters Tax Credit if you use public transit regularly 
- Contribute to your IRA or 401k 
- Strategize

Your deductions (Make 2014 the year you get all your medical issues taken care of, get the new glasses, have the dental procedure done you’ve been putting off, so you can qualify for the deduction. An every other year approach is smart if you come in just under most of the time. ) 
- If you have made a big purchase in the last year, such as a vehicle or boat, you may be able to get credit for the sales tax paid 

Source :http://www.abc15.com/dpp/money/tax-season-2014-tax-filing-tips-for-young-professionals#ixzz2pik44J4Z

If you like to file your taxes early and then chuckle at all the procrastinators who wait until April 15 nears, your day of reckoning is getting close. The earliest day the IRS will begin processing 2013 individual tax returns is Jan. 31, 2014, a date slightly later than usual due to the government shutdown last fall. What are the advantages of filing early? Here's a list of good arguments from tax-preparers.

Get your money now. This is the most obvious reason a taxpayer might want to file as early as possible. But try not to fall into the trap of thinking you need the refund before the IRS can get it to you. Some tax preparation services offer refund anticipation loans, which have steep fees that eat into that refund. You'll also likely get your money in a shorter amount of time if you file earlier than the person who files a month or two after you, according to Elaine Phelan, a professor of accounting at Siena College in Loudonville, N.Y. Early filers may only have to wait for their refund for 21 days – the average time taxpayers have had to wait in recent years, and sometimes less, according to the Internal Revenue Service – whereas a later filer may have to wait longer, say, 31 days.

"If you work with a paid preparer, they are excited to jump into the new year and will enthusiastically get your taxes done quickly," Phelan says. "If you are expecting refunds, the IRS processing centers are less busy and will process your claim faster, so you might even get that refund sooner." And, of course, if you file electronically versus putting your form in a mailbox, you should get your money even faster.

It may help with financial aid. "Taxpayers with college-age children need to get their tax information early to get the maximum amount of financial aid," says Lawrence Pon, a tax specialist who owns an accounting firm, Pon & Associates, in San Francisco. He says there is a direct link between the Free Application for Federal Student Aid form and the IRS, so your tax information is sent directly to the financial aid form without you having to provide it yourself.

It may help if you and your ex-spouse are feuding. Hopefully you don't fall into this category, and it's better for each party if you can keep the IRS out of your marital strife, but Pon says that "sometimes divorced people do not agree on who claims the children as a dependent, even though there may be a court order and an agreement. Whoever files first will claim the child, and the other ex-spouse may be out of luck."

You'll lessen your odds of becoming a victim of identity theft. "The sooner you file your return, the less opportunity someone else has to file a return in your name," says Joe Reynolds, identity fraud product manager at Travelers, headquartered in New York. He points out that some criminals have been known to break into a home or car, steal identification and then file taxes in that person's name, scoring a refund that doesn't belong to them. The odds are slim that that will happen to you, of course, but it is another reason to file earlier rather than later. Reynolds also advises getting your refund via direct deposit "so criminals can't have it redirected to their address or steal it from your mailbox."

There's more time to catch potential mistakes. If you wade into your taxes now and discover there's paperwork you need that you don't have, or it's simply going to be a more complicated tax year than you anticipated, you may not end up filing early, but now you have more time to spend on your taxes. Not that there aren't smart reasons to file close to or on April 15, of course. If you owe the IRS money, there's really no financial advantage for you to give it to them any earlier than April 15.

Still, by preparing your taxes early, you'll know earlier how much you owe and will have more time to drum up the money to pay. If you have a really complicated tax form – in which case you probably have a tax consultant or accountant advising you every step of the way – "many filing issues are resolved as the [tax] season goes on for the IRS," says Tim Gagnon, an assistant academic specialist of accounting at the D'Amore-McKim School of Business at Northeastern University in Boston. It's possible that if you file too early, Gagnon says, you "may need to amend filing if the IRS changes forms, instructions or interpretations." Still, for most taxpayers who have refunds coming, filing early rather than later is the smarter decision. It is also psychologically better for many people, Pon says. "Get the darn task out of the way" is the reason most of his clients opt for early filing, he says. He adds that it's always "nice to get something checked off your to-do list early instead of letting it fester."