One million people who used paid return preparers, overpaid their taxes by not itemizing deductions finds a new study by Congress's General Accounting Office (GAO).

It also reports that while return preparers provided clients with more han 12 million advances against expected refunds during 2001, charges for doing so often were very high.

Example: In one case, $174 charged for an advance against a $700 refund expected to arrive in 10 days amounted to 900% Interest at an annual rate.

Important: You are responsible for what's on your tax return. Seek strong references for any preparer you use and shop for the lowest fees and rates.

401 (k) CONTRIBUTIONS

You must decide now on your 2004 salary reduction contributions ("elective deferrals"). For 2004, the contribution limit is $13,000 (or $16,000 if you'll be age 50 older by Dec. 31, 2004).

ADJUST WAGE WITHHOLDING

If you expect to be in a lower tax bracket because of additional write-offs, new law benefits that you can claim, or simply because of cost-of-living adjustments to the tax brakets, file a new Form W-4, Employee's Withholding Allowance, with your employer, to increase the number of your withholding allowances.

SOCIAL SECURITY

If you are going to be age 62 or older in 2004 but under the normal retirement age for Social Security (65 years and four months), decide whether you want to collect benefits early. Working while collecting benefits can result in a reduction of benefits when earnings exceed a set limit.

In 2004, the limit has increased to $11,640 for the year ($970 per month). Benefits are reduced by $1 for every $2 of excess earnings.

Top of Page