How to prepare for Tax Day
Brace yourself, it's tax season! Preparing to file your taxes can be hectic and stressful as you scramble to meet the (now) May 17th deadline. But don't panic! Here are some things that can help you prepare to file them as smoothly as possible.
What do I need to file my taxes?
Well first, organize, organize, ORGANIZE! Gather all of your personal information that you would need to identify who you are, your spouse (if filing jointly) and any dependents.The IRS needs to know exactly who is filing and who is or isn't covered in your tax return. This includes everyone's legal full name, date of birth and their social security numbers.
You then need to gather all your income information for the year you are filing for. This will include any income from the following:
All W-2 forms from employment;
Various forms of 1099 (-INT, -DIV, -B, etc.) K-1s and stock option information;
Form 1099-G from state and local income tax refunds and/or unemployment;
Any income from businesses or farming-this includes any profit/loss statement, capital equipment;
Used your home for business—the home/office size, home/office expenses;
Any IRA/pension distributions Forms 1099-R, 8606;
Any rental property income/expense—profit/Loss statement;
Forms SSA-1099 if you received Social Security benefits;
Form 1099-C if you received income from sales of property;
Forms 6252 if you had a prior year installment sale information;
Any other miscellaneous income such as jury duty, gambling winnings, scholarships, etc.
All these forms should be sent to you by January 31st of the year that you are filing the taxes not the year you are filing for.
How to reduce the amount of your income taxed to increase your refund?
Now that you have gathered your income that is half the battle. But you may start to wonder just how much you may owe good old Uncle Sam? As the anxiety may start to creep in, don't worry. The following items can reduce the amount of the income that is taxed:
Any energy credits;
Student loan interest;
Medical Savings Account (MSA) contributions;
Self-employed health insurance premium payments;
Keogh, SEP, SIMPLE and other self-employed pension plans.
To Itemize or Not to Itemize?
Some people get confused about itemizing their taxes and whether or not it is worth it. The government does offer a number of additional deductions and credits that can help lower your tax burden to put more money in your pocket. Such as:
Child care costs;
Education costs—forms 1098-T;
Home mortgage interest and points you paid—Forms 1098;
Investment interest expense;
Other miscellaneous expenses-union dues, unreimbursed employee expenses, etc.;
Alimony paid that is tax deductible (Applicable to divorces finalized before January 1, 2019);
Charitable donations-monetary, clothes, products;
Medical and dental expenses.
Also, keeping a track of any taxes that you have paid throughout the year can help you from overpaying taxes. These include state and local income taxes, personal property taxes and real estate taxes.
There is a lot that goes into filing your taxes and nobody ever said it was going to be easy. But you don't have to go it alone. Gather your information together and seek assistance from a qualified CPA.