You may start by doing an extensive tax avoidance planning. One way to do this is to know every possible way you can legally avoid tax. For non-business taxpayers, you may look at your filing status and the related exemptions. You may want to find information on who should file the tax return and who would qualify as dependents considering your filing status.

Knowing what tax forms are available go hand in hand with choosing the filing status that best suits you. To discuss in detail, there are three versions of the federal income tax form an individual can choose from—form 1040EZ, form 1040A and form 1040. The basic rule in choosing a tax form is “the simpler the better.” The IRS is inclined not to audit returns that are made on simpler forms.

The IRS Form 1040, or what is usually called the “long form,” is the most complicated and time-consuming among the three as it is designed to cater to every possible qualification an individual taxpayer has. The IRS form 1040EZ and IRS Form 1040A, on the other hand, are designed to account for a group of taxpayers with more specialized qualifications.

You can file your tax return using an IRS Form 1040EZ if you qualify for the following restrictions: your filing status is single or married filing jointly; you must be under age 65 and not blind; you are claiming any dependents (other than yourselves); your taxable income is less than $100,000; you are not claiming any adjustments to income; the only credit that you can claim is the Earned Income Credit (EIC); the only income you can report for the tax year are from salaries, wages, tips, fellowship grants, or taxable scholarship, APF (Alaska Permanent Fund) dividends), unemployment compensation, and your taxable interest is not over $1,500.

As for the IRS Form 1040A, you will only qualify if you have income only from the following resources: wages, salaries and tips; interest and ordinary dividends, pensions, annuities and IRAs, taxable social security and railroad retirement benefits, taxable scholarship and fellowship grants; capital gains distributions; unemployment compensation; Alaska Permanent Funds dividends.

Start doing your tax planning now.

The software does all the hard work for you. It will choose the appropriate form to fill in with every information you give, it checks and corrects errors, gives you all the necessary schedules, it even helps you utilize all possible ways by which you can save on taxes. You also have the option of filing either through paper or by electronic means. All you have to do is answer questions in an interview process that is easy and fast.

Turbo Tax also has a built-in calculator that will do the calculations for you. It does all the addition and deductions needed to complete your form. The Turbo Tax guides you through every link and answers your questions so you are not left wondering where all the figures have gone.

To top it all, you can get explanations on tax regulations and expert advice that are very easy to understand.

A disadvantage of Turbo Tax is that it costs more than other tax software. But this is a small price you will be paying for all the comfort you get. Another problem you may encounter are errors while imparting information. Several people have reported errors but all these were quickly addressed by Turbo Tax.

Turbo Tax, a product of Intuit, has been around since 1983 and has now become the leading brand in tax software. The product is being updated every year to adapt to the changes in income tax forms and federal tax laws. It also works with other brands of software like Quicken, Quickbooks and MS Money so less data is needed from you. This makes the already easy work even lighter for you. Turbo Tax can also retain information from last year’s tax return, given that you are a regular user.

The burden of having to pay taxes is in itself a cause of irate for taxpayers; the nitty-gritty of filing for tax returns is making the whole experience even worse. Nobody has to put up with this with all the technology available. You are not in this modern time for nothing.

So, you have filed your taxes and now you have tax records that
you need to do something with. Instead of just shoving them in
the filing cabinet or in a closet or drawer somewhere, you
should take the time to create a system that will allow you to
preserve the records in a way that will allow you to call on
them when you need them. Most people file their taxes on time
each year, but they don’t work to maintain them the way that
they should. It is advisable to keep your records on file for at
least five years as you can be audited for past tax years at
just about any time. Being audited is not the goal of anyone,
but if you have your tax records all in one place you won’t have
to stress about finding the paperwork and proof that you need.

Even if you prepare taxes online you should print all of the documents that you need
and file them. A great way to keep all of your tax information
organized is to have one file drawer dedicated to taxes. Create
several folders that are dedicated to one tax year each will
help you not only have all of the records that you need, but you
won’t have to work to figure out what is what and from which
year if you ever do have to go back and pull old information.

If you go for a free tax return from one of many companies that offer them you will
want to be sure to get copies of all of the information. Just
because the preparation is free doesn’t mean that you don’t need
to keep all of the paperwork. The thing that many people forget
is that tax preparation services aren’t responsible for your return, you are. So if you are audited in five years, it will not come back on the
service provider, it will come back on you. When your taxes are
file be sure that you get all of the paperwork and also be sure
that you understand what was done so if there is an issue in the
future you will be able to speak to what went on.

Keeping records organized is a great way to feel confident about
your taxes. If you have a place where all of your tax
information goes you will be able to call on the information
that you need when you need it and it will also be filed away
safely if you have an issue in the future. Tax documents get
lost quite easily, but when you work to maintain them it can pay
off well.

About the author:
Caitlina Fuller is a freelance writer.

• Tax avoidance involves legally structuring your affairs to take advantage of provisions or loopholes in our tax law.
• Tax evasion is a no-no. It can bring civil and criminal penalties, and can mean up to five years in prison.
• A voluntary disclosure may be your best option to come clean if you’ve been evading taxes.
• Your marginal tax rate is generally the most important tax figure for you to know.
• Simply put, it’s the amount of tax you’ll pay on your last dollar of income.
• Your marginal tax rate depends on three things: your province of residence, your level of income, and the type of income earned.
• A deduction reduces your taxable income and offers tax savings equal to your marginal tax rate.
• A credit reduces your basic federal or provincial tax bill, dollar for dollar, and results in savings on provincial surtaxes where they apply.
• There are two types of credits: non-refundable and refundable.
• Educate yourself about what kinds of events can lead to a tax bill.
• There may be good reasons for involving yourself in some of these taxable events, but wait until a future year to trigger the tax hit if you can.
• Don’t hope for a refund when you file your return. Aim for a small balance owing instead.
• Request to have source withholdings reduced when you expect a refund due to certain deductions (file Form T1213 with CCRA).
• You may have to make quarterly installments when your income is not subject to source withholdings.
• Consider the installment method that results in the lowest quarterly payments.
• Think of taxes any time big events happen in life.
• Visit a tax professional before the events take place, if possible.
• If you disagree with your Notice of Assessment, call CCRA to straighten things out.
• If a phone call doesn’t help, consider filing a Notice of Objection within the required time limits.
• Your last line of attack is to take CCRA to court, starting with the Tax Court of Canada’s informal or general procedure, and potentially ending at the Supreme Court of Canada.
• If you have faced circumstances beyond your control that led to interest, penalties, or other unfair tax treatment, don’t be afraid to ask for relief under our tax law’s fairness rules.
• CCRA is not obligated to provide relief, and they will look at your history when making a decision.
• Your province or territory may also offer similar relief if you ask.
• Splitting income involves moving income from the hands of one family member, who will be taxed at a higher rate, to the hands of another, who will face tax at a lower rate.
• The attribution rules prevent many attempts at passing income to other family members.
• Splitting income most commonly entails investing money in lower-income hands, making deductible payments to lower-income family members, and claiming deductions and credits on the most appropriate tax return.
• Every trust has at least one settlor, one trustee, and one beneficiary, along with trust property.
• A trust is commonly used to split income by holding investment portfolios or private company shares.
• When setting up a trust, be sure to visit a tax pro to ensure that the trust is settled, the trustees are named, and the trust documentation is prepared properly.
• The “kiddie tax” is legislation introduced in the 1999 federal budget that will cause tax to be paid at the highest rate by minor beneficiaries who receive certain types of income from a private company—even through a trust.
• There are still opportunities to use these family trusts to split second-generation income.
• Alter ego trusts are an estate-planning tool that seniors may want to consider.
• In-trust accounts are a popular method of saving for a child’s education but are often set up improperly. There are two steps involved in setting up an in-trust account properly.
• Once the money is in the in-trust account, forget about getting it back—it belongs to the child and he or she has a right to it at age of majority for education or otherwise.
• Both Registered Education Savings Plans (RESP) and in-trust accounts can play a significant role in paying for a child’s education.
• Every family is entitled, for 1982 and later years, to one principal residence exemption to shelter from tax the profits on the sale of a home.
• A child who is 18 years or older in the year, or who is married, is entitled to his or her own principal residence exemption.
• Ownership of a second property can be transferred to multiply the available exemptions, but professional tax advice is going to be important here!
• You can deduct costs for moving as long as you’re moving to a new work location or to school, and your new home is at least 40 kilometres closer than your old home.
• Plan your move so that it coincides with a new work or school location and meets the distance test.
• If you’re moving to a new province, time your move to take advantage of lower tax rates.
• Remember that you can pay an adult child to help in the move and then deduct this as an expense.
• Claim childcare expenses where they were incurred to allow you or your spouse to earn income.
• The deductible amount will be based on the age of your child and whether or not he or she has any infirmities.
• Maximize the base for your claim by reporting all your kids 16 or under on your tax return, even if you didn’t incur childcare expenses for some of them.
• You’re entitled to a disability tax credit where you have a severe and prolonged disability that markedly restricts a basic activity of daily living.
• You may be entitled to claim attendant care costs if you’re disabled and require the care to earn income.
• Attendant care costs can be claimed as a deduction or as a medical credit. You’ll have to do a calculation to figure out which is best for you and your family.
• Claim the equivalent-to-married credit if you are separated, divorced, or otherwise single, and you support a relative who lives with you.
• The credit could save you over $1,500 in tax.
• Joint custody will generally allow one caregiver to claim the credit, but it may be possible to structure your separation agreement so that both parents can claim a full credit when joint custody over more than one child exists.
• When dividing up the assets after separation or divorce, avoid taxes on the transfer by splitting RRSP or RRIF assets in accordance with a written separation agreement or a decree, court order, or judgment.
• Canada Child Tax Benefits are based on the combined incomes of both spouses and, as a result, often quickly disappear.
• Make an election within 11 months of marriage breakdown to have the benefits based on one income only. This may increase the benefits significantly.