Taxes Made Simple

You'll want to look at Form 1040 for this one. Don't have a Form 1040 in front of you? Here, now you do.

Here's the tip: Understand every deduction mentioned on Lines 23-35 and every credit mentioned on Lines 47-52 (and Lines 69 & 70). If you don't know what an item is, look it up in the instructions to Form 1040.

It sounds like a terrible chore, but it really isn't. The instructions are organized line-by-line, so looking up a particular deduction or credit will only take a minute or two at most. Your grand-total time invested will be something like 10-15 minutes. (Most of the deductions are pretty self-explanatory, so you'll only need to look up a handful.)

Don't get lazy now. I can tell you from personal experience that this 10-15 minutes of work could be some of the most highly-paid work you'll ever do.

For example, by using this method my first year out of college, I learned that I was eligible for a $200 Retirement Savings Contribution Credit. $200 in 15 minutes is pretty darned good.

This year, two of my friends were eligible for the Recovery Rebate Credit. If they hadn't learned what this credit was, they would have lost out on over $400.

If you don't know what a specific credit or deduction is referring to, please, take the time to look. Otherwise, you could very well be throwing away money.

Want to learn more about taxes? Take a look at my most recent book, Taxes Made Simple: Income Taxes Explained in 100 Pages or Less.