People dread tax preparation for good reasons. They don’t want to go through all the paperwork necessary to complete the process. Others know they may owe taxes but are not sure how to pay them. Getting organized by gathering documents and setting aside time to prepare your taxes ensures the task will get done effectively and on time. Here are actions to take to jump start the tax filing process.
Gather your paperwork
Documents related to your tax filing should be within reach. Start by collecting documents such as receipts and reports. During the year, have a folder or designated area to keep any documentation you’ll refer to when preparing taxes. If you run a business, these documents should be separate from personal related documents and statements.
Personal documents may include paperwork from your employers such as a W-2 statement or earnings report, contributions made to retirement accounts, flexible spending healthcare accounts, etc. Think about what papers are necessary for filing your return that provides details about income, purchases, and investments made for the tax year in question.
Assess important documents
Upon gathering your documents, consider the essential papers you’ll refer to while completing your taxes. You’ll want to check your numbers and make sure they are accurate. If you earned income with more than one employer or earned as an independent contractor, you’ll want to scrutinize these numbers to understand how much you received per month. Essential documents to assess include any financial statements, balance sheets, or cash flow statements. Make notes of details you need to explain or provide additional information required for your tax return. For example, if you earned interest or dividends related to your earnings you’ll need to do the math to determine the amount to report.
Understanding deductions you can claim reduces the amount of taxes owed. The number of tax deductions varies depending on your situation. You may have an idea of which deductions you qualify for based on your last tax filing. Because circumstances may change from month to month or year to year, noting what you are eligible for makes a difference in the outcome of your tax return.
Recent changes in the tax code may affect which deductions you can take. Changes affect both business and personal deductions. In some cases, certain things recognized as a deduction last tax season may no longer qualify. Some changes may include an increase or decrease in the amount of a deduction. Situations such as dependents, filing status, student loans, and mortgage loans may have changes you need to know about before filing.
Make a note of tax filing deadlines and extension requests
Know the deadline for getting your taxes completed. Aim to get them filed early to beat the deadline. If you need more time, consider filing for an extension. An extension gives additional time to file your taxes without a penalty. Assess your situation to determine when you’ll have your taxes completed. Some cases may need more time if you need to collect additional paperwork or need to clarify details about your filing. People may qualify for an extension if they were a victim of a natural disaster, experienced a health crisis, or you need to file a return on behalf of another person or entity besides filing your own.
Take notes on questions or concerns and how to address them
Once you’ve collected and organized your documents and assessed your situation, do you have any questions or concerns? Make a list and determine your options to get answers. Sometimes people are not able to file yet if they are waiting for specific paperwork to come in the mail. Check to see how long it takes to receive certain documents. In some cases, employers are required to mail employee earnings information such as W-2 statements within a specified timeframe so people can file on time. If not, the employer may be fined for causing a delay.
You may have questions about how to pay if you owe. If you don’t have the money upfront, what are your payment options? Do you have concerns about deductions and what you can claim? Are you unclear about your withholdings, your retirement account, or earnings received from freelancing? After making notes of concerns reach out to someone you trust to get answers such as a certified public accountant or professional tax preparation services.
Learn tax filing mistakes to avoid
Filing a tax return requires being as accurate as possible with your information. The information will be verified with other entities. A mistake can be careless but costly if not corrected immediately. Sometimes unintentional errors occur while doing math or entering data on the form. Such errors may be caught while reviewing the form upon completion and adjusted accordingly.
Other errors include filing a return with the wrong status, failing to report all income earnings, and leaving out deductions you’re eligible to take. People may lack organization of paperwork during the year misplacing receipts for donations, mileage, or other expenses. Waiting to file at the last minute should be avoided as it increases risks of errors or filing late. Some choose not to file a return at all, even if they don’t owe or expect a refund. It is best to file to keep your tax records current.
Choose a tax preparer service
Getting help for your taxes may include working with a tax preparer such as available services at bswllc.com. It is a good idea to choose a professional in advance to avoid last-minute hassles of locking in tax help. If you worked with a provider last year that didn’t provide the support and experience you expected, start searching for another service. Now is a great time to learn the benefits of using a qualified tax preparer. There are also tax prep software service programs if you want to file yourself or if you can’t afford to hire an expert.
Consider the list of questions and concerns you have as a guide to help you select a compatible preparer. An experienced preparer will review your situation thoroughly and address any concerns. You can get additional tips and guidance on how to keep records for personal and business finances and learn how long it is necessary to retain your documents. It is common for taxpayers to ask about which documents they can discard after filing and what options they have for making payments if they owe.
It is essential to know what to look for when choosing a tax preparer, including qualifications and credentials. They should have proper authorization recognized by federal standards to provide tax preparation services. Ask about service fees and how they are paid. The complexity of your tax return determines fees. Ask about the process of filing a return and if electronic filing is available. Learn about their contact availability in case you have questions before or after your return is filed.
Understand law changes
The federal tax code regulations have changed. You’ll want to review this information while evaluating deductions you plan to claim. You can grab a tax return from the previous year and compare your numbers. You may notice changes from last year to this year to understand how the code changed. For example, if you received healthcare coverage during this time, you’ll report what coverage you received and when. Taxpayers might not have to pay the penalty if they did not have any healthcare. Many deductions have limitations on how much to deduct, or you can no longer claim it. Implemented changes may affect interest earned in situations such as a home equity loan and job-related expenses.
Determine options if you owe or expect a refund
There are a few things to review as you learn more about your tax status for this filing. If you owe taxes, it is imperative to learn how to make payments. Tax experts say if you owe it is due by the filing deadline. Others choose to work out a payment plan themselves or be accountable with a professional preparer. The federal government has options for repayment worth reviewing at any time. Start saving money now, even if you’re not sure you owe. A jump start can make a difference if choosing a repayment plan option.
If you’re expecting refund congratulations! There are several options to consider such as opening a savings account, making donations, retirement and savings contribution, or deposit it into your current account for immediate needs. You can split your refund to go into one account, but there is an authorization form to submit giving permission.
Tax filing is an essential financial responsibility for taxpayers, but it is easier to plan as much as possible. Whether you owe or expect a refund, it is imperative to use your time wisely. Working with a financial expert such as an accountant or tax preparer is helpful, especially if you have questions or concerns about your situation.