Tax season can be daunting, but proper preparation can make the process smoother. Good financial organization is key to taking advantage of potential deductions, so ensuring your records are in order is important. In this post, we’ll go over the steps you need to take to ensure you’re ready for tax season.
Barron Income Tax will explore the best budgeting and accounting software and review which documents and records you should have. Also, provide tips and tricks to help you keep your finances organized throughout the year. With our guidance, filing taxes can be a breeze.
Table of Contents
Overview of Tax Season
Tax season is the period leading to April 15th, when tax returns must be filed. During this time, individuals and businesses are responsible for preparing and filing their taxes following the rules and regulations set forth by the Internal Revenue Service (IRS). It can be a stressful time of year for many Americans, so it’s important to plan and stay organized.
There are several reasons why it pays to get a head start on preparing your taxes. First and foremost, you’ll want to ensure you don’t miss any important deadlines. For those filing individual tax returns, April 15th is the deadline for submitting your return. In addition, you’ll want to ensure you take advantage of any deductions or credits you qualify for to save money and possibly reduce your tax burden.
Tax Season Checklist
Before starting with your taxes, you should create a checklist of items that must be completed.
Gather Important Documents
Before filing your tax return, you must gather all the necessary documents to complete the process. This includes W-2 forms, 1099 forms, receipts, bank statements, investment records, etc. You should ensure these documents stay organized in an easy-to-access location so they are readily available when needed.
Consider any Changes to Tax Status
If there have been any major life changes since filing your last return (marriage, divorce, new job, etc.) then you may need to adjust your withholding amount or claim a different filing status on your taxes. Be sure to consider these changes and update any tax deductions that may be affected.
Assess the Tax Situation
After gathering all the necessary documents and considering any status changes, assessing your overall tax situation is important. This includes taking note of which deductions or credits you may be eligible for based on income level and expenses. It also involves estimating how much you may owe in taxes or if there is hope for a refund.
Deductions and Credits
When filing your taxes, you may be eligible to receive certain deductions or credits that can help reduce your overall tax bill.
Itemized deductions are expenses you can subtract from taxable income. Common itemized deductions include medical expenses, mortgage interest payments, charitable contributions, business expenses, etc. These deductions can lower your taxable income and reduce the amount of taxes owed.
A tax credit is a dollar-for-dollar reduction in taxes owed instead of just reducing taxable income like deductions. There are various types of credits, such as child credits, education credits, earned income credits, and more, which can further decrease the amount owed at tax time.
Once you have gathered and assessed all the necessary information, it’s time to decide between self-filing or hiring a professional to help with the process.
Self-filing is possible with free software provided by the IRS, such as Free File fillable forms or TurboTax. These services offer basic forms and guidance on filing an individual tax return without needing an expert. However, they do not provide specialized advice on complex situations or mistakes made on prior year returns.
Hiring a Professional
Suppose individuals are unable or unwilling to file their returns. In that case, they may wish to hire a qualified tax professional to assess their situation. Plus complete their return accurately and efficiently while taking advantage of all applicable deductions and credits. Make sure you research different options before deciding who will prepare your return, as rates will vary depending on experience level and services offered.
Other Strategies for Tax Preparation
In addition to self-filing or hiring professional, other strategies can assist individuals with getting ready for Tax Day:
Use Tax Preparation Software
Personal tax preparation software is available from various sources, such as Intuit’s TurboTax, which offers step-by-step guidance throughout the filing process from start to finish, including assistance with determining deductions and credits available. This type of software is excellent for taxpayers looking for extra support in completing their returns accurately. However, basic versions only cover very straightforward situations, while upgraded versions can help with more complex financial scenarios such as investments or rental properties.
Review Last Year’s Tax Returns
Reviewing prior year returns can help taxpayers discover potential errors or missed opportunities and identify ways they could save money while filing their current return. It also provides a jumping-off point when beginning work on this year’s return since some elements, such as Social Security numbers or occupation type, will remain unchanged.
Plan Ahead for Next Year
Once this year’s taxes have been filed, taxpayers should begin planning for next year immediately by ensuring that all pertinent records are organized throughout the year. This will give them easier access when it comes time to file again next year. Additionally, researching new tax laws, credits, or deductions that could save money in upcoming returns. This could prove beneficial in cutting down future expenses.
Tax season can be daunting if you’re not prepared, but with the right planning and organization, it doesn’t have to be. By collecting necessary documents, assessing your financial situation, and taking advantage of any deductions or credits available, you’ll be well on your way to ensuring your finances are ready for Tax Day. Whether you’re filing yourself or hiring a professional, the most important thing is to organize your documents and stay on top of any changes that may occur throughout the year. With the proper preparation, filing taxes can be a breeze, but in these hectic days, it is difficult to manage everything. That’s where we come! We have a team of professionals with a decade of experience. Barron Income Tax insurance, sales tax preparation, personal financial advising, and will do all of your work.