Advice on How to Get a Bigger Tax Return in 2012

[gogirlanime]

Hello. This year I was quite upset with my tax return I got $993 back for 2011 and in 2010 I got almost $2K. Two reasons this happened, I made over $20K in 2011 and I went to school in 2010 and paid for my tuition.

My question:
Are there any books or websites that help you with detailed things on what you can add to your tax return? Like, medical bills I remember seeing on Turbo Tax, I wish I had known that because I paid a lot of medical bills in 2011 and didn't know you can get money back for that Like what can you get returns for, how do you keep track of it over the year, etc? I would like to know more about how to drive up your tax return as much as possible and how it works to the fullest without being an expert

Please and thank you!

[Bob B.]

I am NOT a tax expert.

But medical bills have to be in excess of 7.5% of your AGI (I think) to count. And, you have to itemize them. For itemization to work for many, you have to pay interest on a home mortgage. Otherwise, the standard deduction is likely to generate a bigger refund.

[photo]

In addition to what Bob said, remember that the bigger your refund, the more money you are "lending" the government free of interest.

Personally, I prefer to pay in a few thousand dollars and usually do.

[jpg7n16]

My question:
Are there any books or websites that help you with detailed things on what you can add to your tax return?

Here's a great site with some listings of deductible items:
Tax Topics - Topic 500 Itemized Deductions

This is like a big book on tax:

http://www.irs.gov/pub/irs-pdf/p17.pdf

For a textbook on the subject:
Income Tax Planning: Money Education, Financial Planning Textbooks for Financial Planners, Academics, and Consumers


But honestly, if you just use TurboTax and pay for the deduction finder - that's much easier than trying to learn it all yourself. It's only like $30 (even less with discounts through my CC) and walks you through all the deductions. They guarantee the largest refund. That's worth $30 to me.

If you still want to learn it on your own, you can't go wrong with the IRS links above. They're free.

[fe2o3ez]

In addition to what Bob said, remember that the bigger your refund, the more money you are "lending" the government free of interest.

Personally, I prefer to pay in a few thousand dollars and usually do.

I am with photo on this. While it can be a nice surprise to get money back at tax time, all you are really getting is money that should have been yours to begin with. It's like telling your company that you will reduce your annual salary by $10000 as long as they give you a $10000 bonus every December. You probably wouldnt settle for that deal, so why allow the government the same opportunity?

I understand what you are getting at, but I hpoe you can change the focus of your question a bit: instead of asking how you get a bigger refund, ask how you can reduce your overall tax liability so that you can have less tax due during the course of the year.

JPG listed several sources and they should give you a headstart. In general, the goal is to shelter as much income as possible, and reduce the taxability of unsheltered income through deductions.

[disneysteve]

Hello. This year I was quite upset with my tax return I got $993 back for 2011 and in 2010 I got almost $2K. Two reasons this happened, I made over $20K in 2011 and I went to school in 2010 and paid for my tuition.

If you are getting a refund of 10-20% of your gross income, you are paying way, way too much in taxes. Adjust your withholding so that you get that money in your weekly check instead.

As for learning what is deductible, check the sources that jpg gave. There are lots of things folks do every day that are deductible: charitable donations, medical expenses, mortgage interest, certain job-related costs, child care expenses, etc. Take advantage of every one you can.

[BuckyBadger]

I agree with everyone else. The goal is not to get the biggest refund, the goal is to get zero refund. That means that you haven't given up any of the money through the year that should be yours.

If you need a tax refund to be some sort of mandatory saving vehicle because you can't save money during the year otherwise, that's fine, but realize that you're giving up the utility of that money during the year. So basically, if you want to get more money back at the end of the year, tell them to take more out during the year. There should be an option on your W4, right next to "Number of Allowances" that asks if you want to to with hold any extra money, "Additional Withholding Per Pay Period." If you want an extra thousand dollars at the end of the year, have them take out an extra $38.50 (assuming biweekly paychecks). And PRESTO, you have an extra $1,000 coming back because you have loaned the government $1,000 interest free throughout the year and now they're giving it back to you.

[Slug]

Agree with the others. You want a refund of $0 to be fully optimized. It's hard to do this if your income is variable, but if it is consistent year over year, then it's time to adjust your withholding.

IRS W-4 Income Tax Withholding Optimization | Sunk Costs Are Irrelevant

[gogirlanime]

Thank you for your replies everyone! I think I'm am just poorly educated about taxes in general I don't think I know how the whole system works at all, I've just done Turbo Tax every year and left it at that. I'm just trying to get as much out of my money every year as I can. I'm 24 years old, I don't think my parents taught me enough about personal financing. Those links are great! I'm going to study up on taxes more

[KTP]

Did you take advantage of the "savers credit"?

If you make less than $22,500 adjusted gross income, the government will give you a tax credit (non refundable though) of 50% of a Roth contribution (max $1000 credit for $2000 contribution).

What does this mean? It means if you have at least a $1000 federal tax bill and can somehow borrow or scrape together $2000 to contribute to a Roth, you just made an instant risk free 50% return on your investment.

50% return risk free is better than a lot of long term CD rates.

EDIT: You still have time to amend your return for this past year and take this credit. It would almost be worth it to borrow $2000 on a credit card at 21% interest just to get the money for the Roth contribution, considering that you would get $1000 extra from the government. You could withdraw $1000 from the new Roth later this year and combine that with the extra $1000 from tax credit and pay back the credit card, being left with $1000 Roth that you didn't have before. Wow...is this credit that good?!?