Tax season is just around the corner. With a bit of preparation, you can breeze through the season. Take the time to work through this list of must dos to make sure you’re prepared when Tax Day comes. The earlier, the better for a stress-free April.
- Know your due dates – Taxes are due on the 15th day of the 4th month after the end of the tax year (unless that is a holiday). That’s a bit of a mouthful. In layman’s terms, that generally means April 15th. This year, however, tax day is April 18 for most people (unless you live in Maine and Massachusetts, which is April 19).
- Gather documents – To successfully file your taxes and estimate your appropriate deductions, you’ll need a number of documents, receipts, and account summaries. Make sure to gather these ahead of time so that you’re not in a bind at the last minute. If you find you’re missing a W2 or 1099 you can request duplicates, but only if you have planned ahead and allowed enough time.
- Take advantage of deductions – Tax deductions are payments you’ve made throughout the year that can be used to reduce your “taxable income.” Common deductions come from student loan payments, mortgage interest, child care, etc. Make sure to research the deductions so that you’re getting the most out of your tax filing.
- Itemize first (even if you plan to use the standard deduction) – If you plan to take the standard deduction, you may try to skip itemizing to save time. However, this could end up costing you in the long run. We recommend calculating your itemized deductions to make sure the standard is really the right way to go. You might be surprised by what you find.
- Coordinate with family– When you file your tax return, you’ll need to list your dependents and determine your appropriate filing status (single, married filing jointly, married filing separately, head of household, etc.) Make sure to coordinate with your spouse, or any other family who may claim you as a dependent. If you’re divorced with children, discuss who will be claiming the kids as dependents. You could be subject to penalties or fees for miscalculating if you don’t get it straightened out ahead of time.
- Know what you have paid – Other taxes you have paid might be deductible, so it pays to keep track of any taxes you have shelled out throughout the year. Keep records of all property taxes, vehicle taxes, local and state taxes, and prepaid federal taxes to be sure you make the most of them on your federal return. In some cases, you can even deduct state sales tax on regular purchases.
- File on time – The most important Must Do is to file your taxes on time. If you end up with a big bill that you can’t pay, you may be tempted to hold off. That is a mistake. Even if you can’t pay your bill it is important to file on time. Failure to pay your tax bill will result in penalties and interest payments, but failure to file will make these penalties worse. If you can’t file because you’re missing documents, you can request an extension up until the end of the due date. This extends the due date of your tax documents until October 17, but NOT your payment. Any payments due to the IRS will be considered late after the due date, so don’t wait to pay.
Tax season doesn’t have to be stressful. With some time and planning, you can breeze through and be on the other side in no time. When in doubt, be sure to talk to a financial specialist or CPA.