As the end of the year approaches and the
thought of taxes looms, some people decide to avoid the rush and start
panicking early. Rather than be stressed about tax season this year, why not
take steps to meet the challenge head-on. Preparing your taxes doesn’t have to
be a hassle if you plan ahead and follow a few simple tips:
Get organized
Make sure you receive all income forms by
the second week in February. Bank statements should be in your hands well
before the end of March. If you make contributions to an IRA, those forms might
not show up until after April 15th, so call your financial institution if necessary
to get the information.
Check each document for errors as it comes
in. If you find any, contact the business or bank that issued the document and
get it corrected.
Collect any receipts you’ve saved including
donation receipts. If you’ve made improvements to your home that include energy
efficiency upgrades, make sure you have these documents as well.
If you live in a state that collects income
tax, make sure you have any separate paperwork that may apply to filling out
those forms.
Line up your deductions
Don’t overpay your taxes because you didn’t
take the time to check your deductions. Most people are aware of using mortgage
interest as a deduction but overlook less common ones such as tax preparation
deductions.
You may be able to take extra deductions
for some big-ticket items such as cars. List any large purchases that you made
this year and have them ready so they aren’t forgotten in the rush of
paperwork.
Education, business travel or other
business related expenses may be deductable. State sales tax is generally
deductable, as is state income tax. If you are unsure about taking a deduction,
talk to a tax preparer or browse the IRS web site.
Contribute to your IRA
Everything that is contributed to your
standard IRA is not taxable and you have until April 15th to contribute for the
previous year. Take advantage of the tax savings and get prepared for your
retirement at the same time; contribute as much as you can.
Although contributions to a Roth IRA are
fully taxed, it’s still a good idea to take this time to max out those
contributions as well.
Decide how you are going to file
There are numerous tax programs out there
as well as some free IRS tax help.
If your return is simple you may be able to file for free, but more complex tax
situations will need a tax program or professional assistance.
Most returns are filed electronically,
whichever preparation method you use. You will get the fastest return of your
refund by providing a routing number on your form that allows the government to
deposit the refund directly in to your account. E-filing also gives you the
opportunity to track the status of your refund through the IRS website.
Don’t rush
Give yourself plenty of time to get this
done. Mistakes happen when you hurry, and waiting until the last minute to get
started just raises your stress levels unnecessarily. Allow enough time to
review the forms a couple times before you need to submit them.
Don’t forget to save a copy of all of your
forms. If your preparation was done electronically you can save your work in a
folder, or print a hard copy for your file drawer.
Preparing taxes can be a daunting task, but with careful planning and organization, it doesn't have to be overwhelming. The tips outlined above provide a comprehensive guide to navigating tax season efficiently and effectively.
By staying organized, collecting necessary documents, and lining up deductions, individuals can ensure that they maximize their tax savings and avoid overpaying. Additionally, contributing to IRAs before the deadline can offer tax advantages while preparing for retirement.
Deciding on the most suitable method for filing taxes, whether through tax programs, professional assistance, or free IRS help, is crucial for accuracy and efficiency. Electronic filing offers convenience and the ability to track refund status, making the process smoother.
Above all, it's essential not to rush through tax preparation. Taking the time to review forms thoroughly and avoid mistakes can prevent unnecessary stress and ensure accuracy. Saving copies of all forms for future reference is also prudent.
With these tips in mind, individuals can approach tax season with confidence and ease, knowing that they are equipped with the knowledge and tools necessary to tackle the task effectively.
