By now, many of us have at least given some thought to getting our taxes together.  The forms are all there, all your statements have arrived from the various institutions, and you're ready to start crunching numbers. 

If you're like me, the idea of paying someone else to prepare your taxes is out of the question, although you may be lucky enough to have a friend or relative to prepare them for you.  If that's the case, and this person knows what he's doing, take advantage.  I you're not so lucky, it can be an arduous process filling out your tax returns.  Between the confusing verbiage, and the ridiculous amount of worksheets and forms, a person could go crazy (or in my case, crazier) keeping it all straight. 

That's why it's nice to have some helpful tips to help you get through this annual ritual.  I've compiled some of the best advice I could find, with links to some more detailed information.  I've also listed some very valuable resources that you might consider using. 

Here are the tax time tips:

1)      Stay organized.  Keep all your documents together as you work on them, and file them neatly someplace safe.  When you're finished, file a copy of everything you sent the government, plus all your backup information (receipts, etc.) somewhere safe and out of the way.  It's always good to look at last year's returns to see what's changed, both on the forms and in your life. 

I also keep the books from the last few years, just in case.  Make sure to save all the receipts for business and personal expenses you plan to deduct, and every form you receive from your stock broker, mortgage company, or other financial institution.  You'll need all this stuff if you're ever audited.

2)      Avoid paid preparers.  I mentioned this in the introduction, and I'm re-emphasizing it here.  Unless you have an unusually complicated return, or you just can't find the time, you should try to do your taxes on your own.  All you need is a few hours, maybe some tax preparation software, and you'll have it figured out. 

For the average person, using tax-prep software helps clarify some of the more confusing aspects.  There are various levels of tax prep help, from simply providing online forms, to calculators, to full-blown tax return preparation.  I've listed some in the second part of the article.

3)      E-file for faster returns.  E-filing comes in two flavors: Free File from the IRS, and E-filing using tax preparation software.  Free File is a public-private initiative that allows low-to-average income household to submit tax returns free over the internet.  There are certain restrictions, and you will generally have to pay for state returns.  For more information, and to see if you qualify, check out the IRS website. 

True E-filing requires you to purchase tax preparation software, like TurboTax, or to use an approved e-file website like Complete Tax.  To speed the refund process even more, have your return direct deposited into your checking account.  It's estimated that filing a paper return and waiting for a check can take up to six weeks or more, while e-filing with direct deposit has a turn-around time of approximately 10 days.  That's a huge difference.

And if you're really anxious you can track your refund every minute at the IRS "where's my refund" page.  And don't worry about giving your bank information to the IRS.  If they really want it, they can get it any time they want.

4)      Take the maximum deductions possible in your paycheck and avoid getting a big tax refund.  I'm sure you've heard this line of reasoning before, but repetition helps drum it into your head.  A large tax refund means you've lent money to the Federal government for a year, interest free.  You give up the opportunity to save or invest that money and earn interest on it.  Plus, large returns can sometimes trigger the attention of IRS audtiors. 

I know some people argue that a big tax refund is the only way they guarantee they'll save the money.  If you find that you need to have a big tax refund to keep from wasting your money, you should really focus on creating a budget that forces you to save.  If you can do without the money in your check now, you can continue to do without it.  Try opening a credit union account, and have those funds transferred right out of your paycheck. 

If you need help with budgeting, or just getting your finances organized in general, try the free Money 4 Life e-book, available at the Dynamic Investors website.

5)      Maximize your 401K and IRA contributions.  It's too late for 401K deposits to reduce your 2003 taxable income, but you can up your deposits this year for 2004 taxes.  You do have until April 15, 2004 to max out your IRA deposits, and still have it count towards your 2003 income.  And not only do you reduce your taxes, but you're saving for the future, which is always good.  If you need some guidance on IRAs, check out The Motley Fool's IRA Center.

6)      If you itemized deductions last year, you'll want to look at the standard deduction this year.  The standard deduction has increased to $9,500 for a married couple filing jointly ($4,750 for singles) from $7,850 last year.  It may turn out that even though you itemized last year, you'll be better off with the standard deduction this year.  Plus, taking the standard deduction will make your tax filing much easier.  If you're not sure which way is better, take the time to do your taxes both ways, itemized and standard deductions, to see which is better for you.

7)      Beware of the Alternative Minimum Tax.  This was can really sting people who itemize deductions if their income, including adjustments, exceeds $58,000 for a married couple filing jointly, or $40,250 for singles.  These numbers are up from last year, but not enough to keep a number of middle class tax payers from getting nailed.  There's a free Alternative Minimum Tax calculator available from H&R Block that can help you compare different methods of deductions.

1)      If you're a student, and had education expenses, you can deduct them on line 26 of your 1040.  And those of you paying off student loans can deduct your interest expense on the line right above.  Isn't it nice to know the government encourages education.  Be careful though, because if your employer paid for all or part of your education expenses last year, you can only deduct what you paid for, not the whole value.

2)      In a rare occurrence, the IRS is putting into action legislation that Congress hasn't passed yet.  Certain provisions of the Tax Technical Corrections Act of 2003 are being put into place to lessen the likelihood that mutual funds, partnerships, and other organizations will have to issue amended dividend statements.  For more information check out this article at the Wall Street Journal Online.  (To get the Online Wall Street Journal for two weeks free, click here.)

3)      Capital gains and losses can have a big impact on your taxable income, and playing it smart with your investments is a good idea.  Make sure you keep track of every purchase and sale of stock (if you don't already) because you'll have more flexibility when it comes to selling your stock in the future.  Your broker only sends you transaction activity for the year on form 1099.  You still have to calculate the gains or losses.

For example, suppose you bought 1000 shares of IBM at $65, and another 1000 shares later for $100.  Your average price per share is $82.50.  Now suppose you sell 1000 shares for $95.  If you calculate your capital gain on the average price, you have to pay taxes on $12,500.  However, if you know the separate purchase prices for each lot, you could calculate your gain a different way by assuming the 1000 shares you sold were the ones you bought for $100.  This way, you have a capital loss of $5,000.  And don't forget to deduct commissions.

While it's too late to sell stock and deduct losses for 2003, you should keep this in mind for 2004.  If you're holding a stock that's a huge paper loss for you, consider selling it, writing it off on your tax return, and effectively splitting the loss with the government. 

4)      If you received a tax check last year for the child tax credit, you have to account for it this year.  Many experts think this will be the biggest mistake made on people's tax returns.  You can find more information on the IRS website.

Resources

There are a tremendous amount of resources available to help with your taxes.  Here are some of the best I've come across, and I hope you find them useful.

The IRS website - of all the government websites, you'd think the IRS would have the most complicated, but that's not the case at all.  The IRS website is fairly easy to navigate, and provides you with a load of useful tips.  You'll also find PDF forms you can download and fill out on the screen.  You can't save them unless you have the full Adobe Acrobat package, but you can print them out.

Turbo Tax Software - I mentioned this one above, and it's the number 1 selling product on Amazon.com.  However, a number of reviews have said this year's version suffers from the "not made in the USA" problem of buggy software and poor technical support.  You'll need to purchase the state version to do both returns again this year.

TaxCut Software - Another tax preparation software package that does pretty much everything Turbo Tax does.  The same problems appear to plague this product as Turbotax.  Again, you'll need to buy the state version as well.

CompleteTax.com - Avoid the issue of buggy software, and file right on the internet.  This is a fantastic service that allows you to fill out your return for free, and only pay if you decide to e-file.  E-filing costs $29.95 for both Federal and State, saving you up to $50 over the package software.  You can also use Complete Tax to check your return, but I recommend going through the whole e-filing process.

1040 Tax Returns - Another online authorized e-filer.  The most basic package starts at $19.95 for Federal returns.  They offer federal e-filing, or you can fill out and print a Federal return that you can mail for only $6.95.  Unfortunately, they don't offer state returns. 

FormSend.com - This site allows you to search for any IRS form, with most of them available for you to fill out online.  You can browse by category or type, and the interview wizard is a great tool for figuring out exactly which forms you might need.

The Motley Fool's Tax Center - This is a must-stop site for tax related information.  It's chock full of good ideas and advice.

CBS MarketWatch Tax Center - More good articles and advice.

I hope I've been able to provide you with at least one piece of good advice.  I know I learned plenty while doing the research.  There are so many issues when it comes to income taxes, and one slip up can have far-reaching consequences.  But if you're smart, and do your homework, you'll be fine.