Editor's note: This article is featured in the Winter 2005 print edition of Ohio Today.
Feb. 4, 2005
By Corinne Colbert
Just as most of us have cleared away the last bits of colorful wrappings from the holidays, a new avalanche of paper is headed our way: It's tax time. It's the busiest time of year for people like Cory Corrigan, BBA '93, vice president of financial services for the Ohio University Credit Union. Corrigan, a CPA, prepares returns for many credit union members and has these words of advice on paying income taxes.
What's the No. 1 mistake people make in preparing their taxes?
A lot of them are simple errors in addition or subtraction. The biggest mistake, though, is that people don't take advantage of all the potential deductions the IRS allows. There are tax credits for education and day care, and you can deduct unreimbursed employment expenses. I see a lot of people who work in construction or traveling sales who don't keep track of their mileage. Those trips may not seem significant by themselves, but when you put them all together, it can make a big difference. It's not difficult to keep track of those things - it's just a matter of being organized, even if it's throwing receipts in a shoebox.
Is it really necessary to use a professional tax preparer?
I always tell people, if you have a simple return without a lot of deductions, go ahead and do it yourself. There's a lot of good software you can buy for about $25, and it's pretty much foolproof. But if you don't have an interest in learning the software, or if your return is more complex, it's worthwhile to have a professional do it.
Is it too late to reduce my 2004 taxes?
No. You can contribute to an IRA until April 15. The limits are $3,000 for individuals under age 50, and $3,500 for those age 50 and up. If you're eligible, these contributions can be deducted from your taxable income. In the 15 percent tax bracket, a $3,000 contribution to an IRA saves about $450 in taxes. In the 25 percent bracket, it saves about $750 in taxes.
It's a definite incentive to fund an IRA if you have the means. A good habit to get into is to use your tax refund to contribute to an IRA.
For more of Cory Corrigan's tax advice, visit Ohio Today Online at www.ohio.edu/ohiotoday/.
Corinne Colbert served as interim assistant editor of Ohio Today.