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Taking the pain out of tax preparation

Personal Finance editor


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© St. Petersburg Times, published February 20, 2000

Few people think tax preparation is fun, but it doesn't have to be painful. Here are some tips to help you get the tax breaks you deserve without getting yourself in trouble with the IRS.

1. Make a match. Names and Social Security numbers on your return must match Social Security records. Any discrepancies will delay a refund, although the IRS will accept your check if you owe money. Babies born during 1999 need numbers, too.

2. Be sure the math is right. If you prepared your return without the help of a computer, check your work with a calculator.

3. Get your papers in order. Organize and save receipts in case the IRS asks questions about your deductions. You must have a receipt for any charitable contribution of $250 or more. The IRS expects you to have proper records if you are claiming job-related expenses.

4. Value your dependents. If you support relatives with minimal incomes, you may be able to claim them as dependents on your return. The income threshold is generally $2,750 (not including Social Security benefits) with exceptions for your children under age 25. Medical expenses paid for others also may be deductible.

5. Capitalize on kids. Children under 17 may qualify their parents for a $500 child credit this year, up from $400 last year. That's in addition to any child care credit or earned income credit.

6. Correct errors at the source. If you receive an incorrect W-2 or 1099 form, ask the issuer for a corrected form. IRS computers are likely to notice if a number on your return differs from the one the issuer reported to the IRS.

7. Avoid dubious deductions. Don't even think about trying to deduct credit card interest, life insurance premiums, health club dues, funeral expenses, car tag fees or a loss on the sale of a home. You'd just be raising a red flag for the IRS, which will automatically disallow deductions like those.

8. Bunch for tax benefits. Bunching expenses such as charitable contributions and real estate taxes into alternate years may allow you to alternate itemizing with taking the standard deduction. Even if you itemize every year, bunching deductions may help you get over the threshold to deduct medical or miscellaneous expenses.

9. Don't repeat past mistakes. If you've been audited before, IRS computers remember. Don't try to take the same deductions that were disallowed in the past.

10. Elect direct deposit for your refund. You'll get it faster than if you wait for a check to arrive by mail.

-- Sources: IRS, CCH Inc.

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