Taxes have been the primary source of government revenue for centuries. The funds collected through taxes are used for various government spending and projects such as development and welfare programs like social security and Medicare. Taxes are essential in the running of government services, which is why eligible persons are required to file their tax returns every year.
Nowadays, taxpayers can file their taxes manually or electronically. The processes of tax compliance have become increasingly easier over the years, with individuals having the option to file taxes on their own or procure the service of professionals. Overall, the tax season is a busy period, which is why you need the following tips to get through the hectic time.
One of the steps in navigating a stress-free tax season is getting your documentation in order from the very start. This is accomplished by gathering all the necessary documents useful throughout the process of filing your taxes. Start by acquiring the w-2 form from your employer to ensure the information reflects your actual income details.
Other tax documents you need to have in place include; business receipts, charity donation receipts, receipts for medical or education expenses, and relevant documentation for real estate, properties, investment earnings, or interest payments. You should also gather the previous year’s tax return receipts and for your spouse or dependents, if any.
You should take note of the changes in guidelines and understand where each document is applicable. Once you have all the relevant documents, you should arrange them in an organized manner, by category. Having all the materials makes it much easier to prepare and file your taxes on time.
Getting organized is vital in identifying any missing document and tracking them down before the deadlines start counting down. A comprehensive list of documents required for filing taxes is available on the internal revenue service (IRS) website.
File Your Taxes Early
Filing taxes early comes with its own set of advantages. One such benefit is that you get your tax refunds faster. Typically, the IRS issues tax refunds within 21 days of filing. In case you owe money to the IRS, filing your taxes early will notify you of this fact and give you plenty of time to formulate a repayment plan.
Some types of investments require the early filing of taxes. For example, limited partnerships have until mid-march to issue their income statements to investors. You should note that if you have any investments, you need to wait for your financial institution to provide your earnings form.
Tax returns are essential for planning your financial future. Filing tax returns early gives you a head start at obtaining financial information that’s useful in carrying out certain processes. An example of one such process is when college students apply for student aid using information from Form 1040.
The other advantages for filing your taxes early include; avoiding the possibility of identity theft, avoiding stresses associated with last-minute filing, and avoiding to file for an extension. Filing your taxes early possess more than one advantage, including giving you time to plan, access proper information, and avoid filing amended results associated with inaccurate filings.
Get Professional Help
Filing your own taxes can be a stressful and time-consuming process. Contracting the services of a professional CPA is especially helpful in navigating the often complicated federal and state regulations and codes. Working with a professional is particularly useful when adjusting to the new tax reform laws or coming to terms with new tax obligations.
The tax code can be very complicated, which is one of the reasons you need the services of a professional. Tax professionals have a vast understanding and knowledge of tax-related issues; therefore, it becomes easier to eliminate errors and omissions that may result in an IRS letter or audit. Their extensive experience can also help you access financial information you may need.
Having an established relationship with a CPA is beneficial when you need professional help dealing with the IRS. A financial expert is also instrumental in optimizing your taxes according to changes in your income and finances. Financial experts can also review your previous fillings to correct past entries and missed deductions and amend them.
However, you should verify the validity of the CPA (certified public accountant) or professional you hire with the relevant regulatory bodies or with the IRS. If you require professional tax services, you can check out UCPAA (the united CPA association), where you can research, compare, narrow down options, and select a competent CPA to file your taxes.
Itemized deductibles comprise of individual deductions that can be combined to reduce the amount of taxable income. Unlike standard deductions, itemized deductions vary from one taxpayer to the other. Some of the common deductibles that can be itemized include; retirement funds, charitable donations, medical expenses, property taxes, and mortgage interests.
When itemizing the deductibles, you should keep proper records of the expenses. You should also note that some deductibles have restrictions to qualify for listing. Itemizing deductions saves you money and can earn you a larger tax refund. The amount saved is dependent on the tax bracket you fall under. You can ask your tax consultant to determine the most appropriate deductions to itemize when filing your tax returns.
Figure Out Your Status
Another factor to consider when filing your taxes is your filing status. First, you need to figure out whether you are filing for federal or state taxes. Your filing status is determined by your age, your income minus deductions, and dependents in your household. The status is used to determine your filing requirements, qualification for certain lines of credit, standard deductions, and your net tax.
For instance, in the case where you are married, you can file your returns alone or jointly with your partner. It depends on the difference between your income, your partner’s income, and the number of itemized deductions you each have. You should consult further to see which filing status suits you without breaking the law.
Protect Yourself from Scammers
Once the tax season begins, many people fall prey to fraudsters, either calling or emailing them pretending to be IRS officers or tax professionals. These fraudsters usually end-up fleecing innocent taxpayers of their money. You can protect yourself from these fraudsters by filing your taxes early.
Another way you can protect yourself from tax-related scams is by conducting thorough checks through the relevant regulatory authorities. You could also invest in proper software tools to protect personal devices from malware and cyber-attacks.
Finally, you might have a lot of questions regarding the filing process during tax season. You should learn to utilize the resources at your disposal to full advantage. The readily available assets include tax professionals and the interactive tax assistant (ITA), which is an IRS tool that provides answers to select tax law queries. Even when working with a tax expert, you should at least learn what’s going on.