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Home » Taxes

2011 Income Tax Return Guide

Last updated by on 7 Comments

It’s February. The W2’s and 1099’s are rolling in. You know what that means. Tax time!

That’s right, it’s time to dig in and start thinking about completing your 2011 income tax return.

To help you get started and perhaps give you a little motivation nudge, I have put together a 2011 tax return guide that will cover some of the basics. This isn’t meant to be a comprehensive guide, rather, just a jumpstarter to get you going.

Keep in mind that I am not a tax professional, so don’t rely on me as one. Serious questions should be taken to a tax professional (or at least answered by reader, Natalie H., who I’m sure is critiquing this tax guide). ;-)

When can I Start Filing my 2011 Taxes?

You’re free to start anytime, as long as you have your W2’s, 1099’s, and any other tax related forms that you are expecting.

However, when and should are two different matters. I’ve found that there can be a number of updates or last minute changes to tax software that don’t hit until early or mid-February. On top of that, I have received 1099’s after January. So I typically wait until late Feb. or early March before filing.

2011 Income Tax Return Guide

When are Taxes Due?

There is another tiny quirk this year with the tax deadline date, as there was in 2011. The 2012 tax deadline (for 2011 taxes) is Tuesday, April 17th vs. the typical April 15th due to Emancipation Day.

What exactly does the tax deadline mean? It is the day you must have your return to the IRS postmarked or submitted electronically (e-filed).

What About a Filing Extension?

If you need an extension to your 2011 tax return, you must file IRS Form 4868 by April 17, 2012. The deadline for extended tax filing is October 15, 2012 (an additional 6 months). This doesn’t mean you can simply get away with not paying your taxes for 6 months, you have to submit your estimated taxes due (if you owe) by April 17, and then submit your paperwork by October 15.

Is there Anything I Can Still do to Impact my 2011 Taxes?

It’s not too late to still have an impact on your 2011 taxes, believe it or not.

The primary impact you can still have comes from contributing to a traditional IRA, Keogh, or SEP IRA.

You will want to check out the 2011 maximum IRA contribution limits and Traditional IRA income phaseout limits for deductions to make sure you are eligible.

You can still contribute up until the tax deadline for the 2011 calendar year, which will lower your overall adjusted gross income (AGI) and potentially bring you a bigger return or cut the taxes you owe.

On top of that, if your income is low enough, you might also qualify for the 2011 Saver’s credit.

To Itemize or Not

Itemizing your deductions, versus taking the standard deduction, may prove fruitful too. If you are self-employed, have a home or mortgage, or have a lot of out-of-pocket medical expenses, you may have a good shot at saving more through itemized deductions than taking the standard deduction. Doing so might even put you into a lower 2011 tax bracket so that some of your income isn’t taxed at the higher rate.

If you did any of the following during 2011, it could impact your return:

  • Made home energy efficiency improvements? You could qualify for a 2011 energy tax credit.
  • Had a child this year or was guardian for at least half a year? You could claim a child tax credit.
  • Had self-employment income? You can deduct business related expenses.
  • Have huge out-of-pocket expenses for medical purposes? Deductible, at a certain level.
  • Paid tuition? Deductible.
  • Paid interest on a mortgage or property tax? They’re deductible.
  • Made a 2010 Roth IRA conversion? You can still spread out your income tax liability over the 2011 and 2012 tax calendar years.

E-File your Tax Return

Efiling is the way to go. It allows you to get your return faster and the error rate is much lower than on paper returns. I’ve written about the best and cheapest ways to efile in the past. I’ve used both Turbotax and H&R Block to efile in the past, and they are equally great products. Both offer a free 1040-EZ federal e-file version. Filing state returns electronically will cost you anywhere you go, as will more complicated returns.

I Got a Huge Tax Return! Awesome, Right?

Getting a huge tax return is not something to brag about. Getting a tax return simply means that you gave the federal government an interest-free loan over the previous year.

If you keep getting huge returns, you may need to make some changes to your withholding tax allowances (you do this through your payroll department at work). Even though they might seem cool, huge tax returns are interest free loans to the government that erode in value due to inflation, sorry to say.

A better goal would be to have a slight amount due back to the government, without having to pay a penalty. That way, the government has given YOU the interest-free loan.

How to See your Tax Refund Status

If, after submitting your return and finding out you’re going to be getting a refund, you’d like to check on your tax refund status, do it on this IRS site.

Keep in mind that the IRS never will send you an email with this option, so go to www.irs.gov and go direct to the site. Then click ‘where’s my refund’.

Reader Tax Tips

A few weeks ago I gave away 5 copies of H&R Block to readers, who offered their tax tips as part of the contest. Here are some of my favorite reader tips:

From Crystal:

“My tax tip: Fully review your return prior to signing. Many of us are tempted to just sign away without reading and reviewing what our tax preparer has done because we “trust” them. In the event you are audited (like a family member of mine was) you can’t tell the IRS “I didn’t know my tax preparer put that”.”

From Bob:

“My favorite tip, which may be obvious to some, is that your spouse may NOT be claimed as a dependent. Per the IRS “On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.””

From Mike:

“Pay your January mortgage bill, and student loans in December so you can deduct the additional interest when you file!”

From Ron:

“My favorite tax tip is to wait til near the end to file since your software will keep getting tax updates well into April.”

From Danielle:

“My tax tip: For recent grads working in a new state, make sure you read up on what type of state tax forms are appropriate for you to use based on your situation. Take the steps to obtain residency in the new state to avoid grey areas down the road.”

From Melissa:

“This is the first year that I will file “by myself”, for myself… while in college and grad school, my parents had their CPA file my taxes along with theirs. Due to that, I don’t really have a tried and true “tax tip” HOWEVER I did learn my lesson one year… ALWAYS make sure to update your address whenever you move! One year my tax refund was sent to my old address (an address in Phoenix, when I had moved to Denver months before for school) and it took me a YEAR to go through calling the IRS every month to FINALLY have the return sent to my parents address in Tucson! Absolutely crazy!”

From Natalie:

“Turn a personal loss into a business loss. For example, if you have a home underwater and need to sell consider renting for a while (6 mo to a year) before you make the final sale. Make sure to file Schedule E to report the rental income and expenses so the IRS knows you were using it as a business. Then when you sell, you can count the loss against your income. This can make a big difference if you are in a higher income tax bracket. “

Great tips, everyone!

Relax!

Taxes get a bad name, but they are not all that bad.

You can easily do them yourself in an afternoon, and if you don’t have many deductions, within an hour or two.

Put on some good music, have a glass of wine, and just relax.

2011 Tax Discussion:

  • What are you dreading or looking forward to with your 2011 taxes?
  • What tax tips do you have for the 2011 tax year?

About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


7 Comments »
  • Natalie H says:

    This is a great overview. Tax software has improved significantly over the years so that most people can easily file their own return.

    I’m personally guilty of filing my tax return too early. I get all the papers I expected and then file. A week later I get something I forgot about or was unexpected. Now a 1040x is needed. It is *much* more difficult than filing your taxes the first time and must be done on paper. Don’t make the same mistake. All tax paperwork must be sent on or before Jan 31. Waiting until mid February to file is pretty safe.

    GE – check your use of tax return vs. refund. The return is the paperwork you file and the refund is the money you get back.

  • Warren says:

    The advice about adjusting the withholding to get only a small return is common and not very useful. Having a smaller paycheck is one of the most efficient ways to spend less. Any small reduction in spending will more than compensate for the inflation on that part of the paycheck that was withheld. The interest rate on a savings account is meaningless these days. Withholding an extra $20 a week instead would result in a $1,000 refund, but at today’s savings account rates would yield $1.00 in interest so that your savings account would have $1,001, assuming that having the cash in your pocket didn’t allow spending at least $1 of it over the course of a year.

    One advisor once told me that he advised people that when they get a raise, they do four things, in order
    1) take a little bit of it home
    2) increase the 401K to always get the most matching
    3) make sure the Roth IRA is at the max
    4) change withholding to have the rest held

    • David says:

      Warren, I completely agree and have been telling people this for years.

      Yes you might get a little extra back each check, but if you gave me $30 extra dollars a week. I would spend it on lunch during the next week.

      If you gave me $1500 I would probably spend a little more time thinking about how to spend it and probably put most in savings.

      The best way to save money is to have it somewhere that you can’t look at it.

    • Amanda says:

      I personally don’t even look at my paycheck when I get it. I put money into savings (Roth IRA and home improvement budgeted savings) and have not problem keeping my hands off any small increase in income. It may be a rare camp, but I would rather the government did not get to hold onto my money for me when they don’t have to. I would rather pay $100 than get back $1000 (if doing this, you have to be aware of the fee they charge you if you’re the one forcing them to “save” their money).

  • Thomas says:

    “Even though they might seem cool, huge tax returns are interest free loans to the government that erode in value due to inflation, sorry to say.

    A better goal would be to have a slight amount due back to the government, without having to pay a penalty. That way, the government has given YOU the interest-free loan.”

    This is probably the most misunderstood part about income taxes in general. It certainly is fun and exciting to get a large refund, until you properly think through the above and realize what a great creditor you are to the government.

    Solid advice.

  • Tom says:

    “A better goal would be to have a slight amount due back to the government, without having to pay a penalty. That way, the government has given YOU the interest-free loan.”

    A noble goal for sure, but if you are a single filer like me, you need to be careful with your withholding status. You can get penalized by the IRS for withholding too much. In high cost-of-living states like mine (NJ), it is difficult to avoid a refund situation. Propety taxes in NJ are outrageous, income taxes are high, and once you add in the mortgage interest deduction, you’re getting a big refund to subsidize your housing expenses. I think that your advice applies more easily for people who live in states where itemized deductions for single filers are closer to the standard deduction and not inflated from high local and state taxes.

  • mdenis39 says:

    Tom — You can get penalized for NOT withholding enough. You need to withhold either at least 100% of what you paid last year OR 90% of what you will pay this year. Satisfy either & you are OK.

    I use an Excel spreadsheet to calculate what my taxes will be this year. I can predict my taxes within a few hundred $ after my first two paychecks of the year. Just enter all your income lines, then deductible lines, any tax credits, and what your monthly estimated withholding is (from your check). Use last year’s returns as a guide

    Now you have an approximate taxable income, use IRS tax tables to determine your total tax. If the withholding is way off, use the IRS’ withholding calculator to determine how many dependents you need to claim to get to your proper withholding amount (I claim 10 dependents on my W4, even though I only have 4 total):
    http://www.irs.gov/individuals/page/0,,id=14806,00.html

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