Income Tax Planning - Strategies For The Strategically Impaired

According to Oliver Wendell Holmes, taxes are what we pay for a civilized society. Thankfully, you don't have to finance 'civilized society' all by yourself. You're only obligated to pay your fair share, plain and simple. Sort of. Actually, the sum of your fair share will depend a great deal on what YOU do as you juggle the numbers.

The fact is, you may be able to preserve more of your taxable income with a little tax planning, performed in a timely manner (take heed, you procrastinators out there). With a few aptly applied tax strategies, you can get your taxes in good shape for Uncle Sam.

Form Over FunctionBut first, which tax form should you use? It's a question that may stump you, but not if you keep reading. Your income tax situation will determine the kind of tax return you must file with the IRS. That organization has provided this quick guide to save you time when sifting through all the tax forms at the post office the night before the filing deadline.
It's EZ to use the 1040EZ if you:

Earn taxable income below $50,000
Are single or married filing jointly
Are 65 or younger
Have no dependents
Earn interest income under $1,500
Go the 1040A route if you:
Earn taxable income below $50,000
Have capital gains distributions from mutual funds, but no other gains or losses
Have tax credits for child tax, education, earned income, child and dependent care expenses, adoption and retirement savings
Have deductions for IRA contributions, student loan interest, educator expenses and/or tuition and fees
Claim no itemized deductions
File the 1040 long form if you:
Earn taxable income of $50,000 or more
Itemize deductions
Earn self-employment income
Have income from the sale of property

Choosing the right tax form could mean money in your pocket. You may receive a 1040A or 1040EZ in the mail from the IRS based on the return you filed last year, but if your situation has changed it may be to your advantage to file a 1040 instead. Say you may pay less tax by filing a 1040 because you have enough deductions to itemize this year. Don't leave money on the table just because you don't want to fill out more forms, for goodness sake.