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Tax Season (SCREAM!!!) – Doesn’t Have to be Frightening

Now that the Super Bowl is over (congratulations, Cheesehead Nation), it’s time to turn our attention to something much less fun – taxes. If you’re anything like me, all those tax statements have started creating a nice little pile on the corner of the desk.

While few people enjoy hunkering down to do their taxes (to be honest, I actually don’t mind doing them), your friends at Smart401k wanted to offer a brief overview of resources to help make this year’s tax season as painless as possible.

How soon can I start, when can I file and what is my deadline?

People forget that you can get started at any time, and then you’ll just have a few numbers to input before filing. Of course you’ll have to wait until you have all the necessary documents to complete your taxes and file. You should have your W-2 form by now, but a lot of other tax documents don’t show up until the middle or end of February. Plus, many investment firms send revised statements in March, so it might make sense to hold off filing your returns.

Because of Congress’ delay in passing the tax bill extension in December, individuals who itemize deductions or are take certain education tax breaks won’t be able to file until February 14th.

The tax deadline is historically April 15th, but our friends at the IRS have given us an extra weekend to get our taxes done. This year, the tax deadline is Monday, April 18th – sorry to all you accountants who wanted to wrap up tax season on a Friday night L.

Please keep in mind that this extended deadline is for Federal Taxes only! Individual states were not required to extend their deadline, so be sure you know the appropriate filing date for your state. Or better yet, don’t wait until the last minute to do your taxes!

Any last-minute ways to reduce my taxes?

Each individual’s situation may be different, so before acting it is a good idea to check with a tax professional. This year, investors who are eligible to deduct IRA contributions have until April 18th to make contributions for 2010. The contribution limit for 2010 is $5,000 ($6,000 if you’re over 50). If you’re married, you and your spouse might both be eligible to deduct contributions, raising the potential deduction to $10,000 ($12,000 if both over 50). And self-employed individuals still have time to open a SEP-IRA and make a deductible contribution.

Where can I go for help?

The IRS website (www.irs.gov) is a great resource to help answer your tax-related questions. In addition to finding all the tax forms you could possibly need, there are sections that answer some of the more basic tax questions and a section listing the approved free filing web resources. If you choose to e-file your return, they even have a tool that helps you determine which websites are appropriate for your situation.

Speaking of e-filing, I highly recommend it. For a simple return, many websites allow you to complete and file your taxes for free.

If your taxes are a little more complicated, you can pay a fee for software that takes a step-by-step approach. In the past I’ve used TurboTax and TaxACT to complete my returns and have felt very comfortable navigating the software and online resources. And I have a co-worker who has used the H&R Block software successfully for years. Software services allow you to feel secure that you used the correct forms – plus you can track the status of your return online.

Some people are most comfortable working with a CPA. CPAs can be very reasonably priced if your taxes aren’t too complicated. And most will e-file for you. But beware of people who call themselves “accountants” or “tax professionals” who may not have the training to back up their titles. There are surprisingly few rules governing tax professionals, and the IRS will still hold you accountable even if someone else did your taxes.

In my experience, the hardest part of doing my taxes is getting the right documents organized. Keeping your important documents well-organized through the year can help make tax season a breeze.

Joe McCulloch, Senior Investment Adviser

About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans.  Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at Smart401k.com.