6 Tax Tricks the IRS Doesn’t Tell You

Although April 15 is quickly approaching, there’s still time to file your taxes before this year’s deadline. As you work on filing your taxes, you may find yourself wondering if there are any IRS-approved “hacks” you should know about to save money.

GOBankingRates spoke with several tax professionals who offered their best strategies for lowering your bill and keeping as much of your money as possible. These tips can help you avoid expensive errors, maximize your deductions and lower your taxable income. Here’s what you need to know to get it right as the deadline draws near.

This one might seem obvious, but you’d be surprised by how many people get into trouble because their accountants forget to include their signature. Your returns are ultimately your responsibility even if you get professional help, so always check that your preparer signed on the dotted line.

“Most people do not know that the tax preparer should have a PTIN, or Preparer Tax Identification Number,” said Miles Brooks, director of tax strategy at CoinLedger. “They should include it on the return and sign. Failure to sign can encourage scrutiny in the form of an audit and may result in you incurring a penalty.”

Savvy investors magnify their gains through DRIP, or dividend reinvestment plan. Instead of cashing out their dividend payments, investors on a DRIP put them right back in to add to their holdings, which then collect even greater dividends.

But the savviest of all remember them at tax time.

“Subtracting your reinvested dividends can save you thousands of dollars,” Brooks said. “While it is not a tax deduction, most taxpayers do not include it. If you have stock dividends and mutual funds and automatically reinvest the extra share, each reinvestment will increase your tax basis, reducing the taxable capital gain. So, not including the reinvested dividends means you will overpay your taxes.”

Today’s outsized standard deduction — $13,850 for single filers, $27,700 for married filing jointly — makes itemizing much less attractive. But an intelligent strategy could lower your taxable income enough to make it worth the extra effort.

One tax expert who spoke to GOBankingRates recommended ‘bunching’ deductions to exceed the thresholds. Bunching is defined as timing expenses by pushing deductible expenses into the same calendar year.

The old adage with investing is that you don’t lose until you sell. While no one likes selling at a loss, doing so at the end of the year can reduce your taxable income — and therefore your tax bill. It’s called tax-loss harvesting.

“This involves selling investments that have lost value to offset capital gains from other investments, thereby reducing their overall tax liability in a year they anticipate more capital gains,” said Richard Lavina, CEO of Taxfyle. “For example, an individual may sell a stock that has declined in value, allowing them to offset capital gains from other stocks they’ve traded. This can be a smart move, as it reduces their tax bill and helps them rebalance their portfolio.”

Many newly self-employed people don’t know they can take the full standard deduction and still write many of their biggest work expenses individually — including the dreaded self-employment tax.

But the write-offs don’t stop there. The IRS lets contractors and business owners deduct expenses related to their vehicles, continuing education, rent, advertising, work-related computers, Wi-Fi and more.

For a full list of approved deductions for individuals, visit the IRS.gov.

Technically, this “is” a tax trick that the IRS does tell you. According to the IRS, there are several options available to families that want to file free federal tax returns.

And even better news: these options include online tax preparation, electronic filing and direct deposit of refunds for free. IRS Direct File, IRS Free File and MilTax are all options families may refer to ahead of the April 15 deadline.