Thursday, March 3, 2011
TAX RETURN TIME: FIVE TIPS TO HELP SINGLES NOW AND LATER
MANHATTAN -- As the tax filing deadline approaches, a Kansas State University expert has some tips for single adult taxpayers that could provide benefits now and in the future.
Amy Hageman, assistant professor of accounting at K-State, is an expert on taxes and tax returns. Her areas of research include antecedents and consequences of tax policy, and judgment and decision-making by taxpayers and tax professionals.
If you are single and filing a tax return, Hageman recommends:
* Giving yourself a raise by adjusting your tax withholdings. Taxpayers who typically receive a large tax refund are essentially making an interest-free loan to the government, Hageman said. While many people enjoy receiving a large refund check each spring, it represents extra money withheld from each paycheck that could be used to pay down debt or build savings during the year. Hageman said to avoid having too much -- or too little -- federal income tax withheld, use the IRS withholding calculator at: http://www.irs.gov/individuals/article/0,,id=96196,00.html
* Keeping track of moving expenses associated with taking a new job. Many single taxpayers move during the year. If taxpayers meet both the distance test -- the new job is at least 50 miles farther from one's old home than the previous job -- and the time test -- work full-time in the new job location for at least 39 weeks during the 12 months immediately following the move -- then they may generally deduct the cost of moving themselves and their possessions.
* Determining if you qualify for the head of household filing status. While most unmarried taxpayers will have a filing status of single, some will be eligible to use the head of household filings status, which can result in a larger standard deduction amount and lower tax rates, according to Hageman. To qualify for the head of household filing status, a taxpayer must be considered unmarried, must pay more than half the costs of keeping up a home, and must generally have a qualifying person, such as a dependent child, living in the taxpayer's home for more than half the year.
* Contributing to retirement savings. Tax season is a great time to assess your retirement savings goals and progress to date, Hageman said. Two tax savings vehicles that are available include a traditional IRA, where contributions may be tax deductible but earnings are taxed when withdrawn in retirement, or a Roth IRA, where contributions are not tax deductible but earnings are generally tax free when withdrawn. Total IRA contributions for 2010 can't exceed $5,000. Taxpayers have until April 18 to make 2010 contributions.
* Filing on time. One important change this year that affects all tax groups is the filing deadline. Normally on April 15, the date has been moved because it falls on a holiday this year -- Emancipation Day in Washington, D.C. -- so taxpayers have until Monday, April 18, to file. Hageman said tax returns electronically filed, or e-filed, are processed much faster than returns that are mailed.