When it comes to filing your taxes, it’s always smart to start sooner rather than later. But, while doing taxes may feel like a chore to avoid, a little preparation can reduce your workload later on and make filing your return that much easier. What’s even better: you might also receive your tax refund earlier.
Also, if you owe additional taxes, you’ll have more time to plan for the expense and avoid potential fines related to late filing. Fortunately, tax preparation is mostly about getting organized. So put your favorite show on pause—just for a bit—and let’s get ready for tax season.
1. Determine if you’ll need tax preparation help
If you’ve worked for just one employer and your income source is pretty straightforward, then you should be able to file your tax return independently. However, some life changes can complicate your tax picture. Ask yourself, in the past year, have you:
- Started, sold, or closed a company
- Gotten married or divorced
- Taken on multiple freelance jobs
- Received a sizeable inheritance
If your financial situation has changed because of any of the above, you may consider hiring a tax professional. Also, consider reaching out sooner rather than later. The closer it gets to the tax filing deadline (usually on or around April 15), the less likely a CPA firm or tax preparation company will have the bandwidth to help.
2. Gather your income records
Part of preparing for tax season is ensuring you have the right information ready. This means collecting documents that show your 2022 income and expenses. The Internal Revenue Service recommends having the following documents handy before you file:
- W-2 forms from your employer
- 1099 forms from banks and other payers, including unemployment payments, dividends, pension, annuities or retirement plan distributions
- 1099-K, 1099-MISC, and W-2 forms or other income statements if you freelanced or did contract work
- 1099-INT forms if you were paid interest
- Any other income documents and records of digital asset transactions
- 1095-A forms or health insurance marketplace statements
3. Track potential deductions or credits
In addition to your income, you also want to report any deductions or tax credits that may reduce the amount of overall taxes you owe. As you prepare to file your taxes, collect records of the following expenses:
- Childcare costs
- Education costs
- Adoption costs
- Investment interest expenses
- Charitable donations, including cash and value of donated property
- Home mortgage interest
- Medical and dental expenses
You can add up your deductions to determine whether itemizing your deductions or taking the standard deduction makes the most sense for you. The above documents can help you understand how many deductions you may receive.
4. Double-check your personal information
This one may seem easy, but it’s extremely important. You want to make sure your personal information associated with your taxes is accurate—otherwise, this can cause delays or raise questions with the IRS. The personal information you’ll want to check includes:
- Your social security number and DOB
- Your partner’s and children’s social security number
- Addresses and dates of property you rented or sold
- Copies of your previous state and federal tax returns
- Bank account numbers and routing information for your refund
5. Be on the lookout for tax scams
Scammers take advantage of tax season to access taxpayers’ personal information, tax refunds, and financial accounts. The IRS advises taxpayers to be aware of email and phone scams and spot the telltale signs. For example, the IRS will never:
- Call or visit you to demand immediate payment via prepaid debit card, wire transfer, or gift card. While IRS agents may call and visit taxpayers, the agency usually sends multiple letters to taxpayers in the mail prior to making phone calls or sending an agent to your business or home. So by the time the IRS connects with you, you should know why. In addition, the IRS doesn’t ask for specific payment methods, such as prepaid cards or gift cards.
- Demand that you pay taxes without the chance to question or appeal what you owe. The IRS is very process-oriented, providing taxpayers with several notices about money owed as well as information about their rights and how to proceed.
- Threaten to have you arrested by local police or other law enforcement groups. The government agency doesn’t bring in local police or immigration officers to collect money owed.
- Connect with you on social media or via text. Again, the agency’s primary form of contact with taxpayers is through mailed letters.
Tax season may not be your favorite season. But you can make it less stressful by preparing what you need for your tax return in advance. You’ll be able to file that much sooner and have earlier access to any refunds coming your way.
Download Valley Bank’s mobile app to ensure you have financial and bank account information at your fingertips for next tax season.