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When the calendar turns over, it’s time to start turning your attention to the upcoming tax season. We understand that knowing how to prepare for tax season isn’t in everyone’s wheelhouse, and this time of year can cause a lot of strain. That’s why we’re here to help ease some of this stress by giving you a simple checklist to keep you on track!
1. Understand the Tax Filing Deadline
The first thing you’re going to want to do to prepare for tax season is to mark your calendar with the tax filing deadline. For most people, the deadline to file a federal tax return is April 15th. If you need more time to gather your financial documents or consult with a tax preparer, you can file an extension, giving you until October 15th to submit your return. Just keep in mind that any taxes owed still need to be paid by the original due date to avoid penalties. This only extends the time you have to file your return.
2. Know Your Tax Filing Requirements
Understanding tax filing requirements is so important. These can vary based on your income level, filing status, and age. Make sure to review the IRS guidelines so you know which forms you need to fill out.
If your income is below a certain threshold, you may not need to file at all. But filing a tax return even when you don’t need to can be useful, especially if you qualify for refundable tax credits.
3. Gather Your Documentation Early
Some of the basic documents you’re going to need to file your tax return are:
- W-2 forms from employers
- 1099 forms for freelance or contract work
- Form 1095-A if you received a premium tax credit through the Health Insurance Marketplace
- Receipts for deductible expenses, like medical costs, charitable donations, and business-related expenses
- Records of any additional income sources
By gathering this documentation early, you’ll have more time to spot any discrepancies and make sure everything is accounted for accurately.
4. Explore Tax Filing Software
Consider using a tax filing software to streamline the process. Many programs are user-friendly and guide you step-by-step through your filing. They usually include features that can help identify potential deductions and credits, making sure that you maximize your return. Some popular options are TurboTax, H&R Block, and TaxAct.
These platforms will also give you updates on the latest tax laws and changes, which can affect how you prepare for tax season. Overall, they can make the process much less daunting.
5. Consult a Tax Preparer
If your tax situation is more complicated, like if you own a business, have multiple sources of income, or need to file a state tax return, consulting a tax preparer could be helpful. A professional can help make sure that all available deductions and credits are used and that your returns are filed accurately.
6. Explore Available Tax Credits
Like we’ve mentioned, during tax season, it's important to be aware of the different tax credits that you could potentially qualify for. Being aware of these credits can substantially lower your tax liability or increase your refund. Some of the most common credits include:
- Child Tax Credits: A credit available for parents or guardians of dependent children under the age of 17.
- Premium Tax Credit (PTC): If you purchased health insurance through the Health Insurance Marketplace, you may qualify for the PTC, making your insurance premiums more manageable. It’s based on your estimated annual income and can lower your monthly premiums.
7. Keep Up with Changes in Tax Laws
Tax laws can frequently change, affecting deductions, credits, and filing requirements. Staying informed on any changes can help you better prepare for tax season. Resources like the IRS website, reputable financial news outlets, and tax preparation services can keep you updated on changes that could impact your filing.
8. Plan for State Tax Returns
If you live in a state that imposes income tax, you’ll also need to make sure that you comply with state tax return requirements. Each state has its own tax laws, forms, and deadlines, so it's important to familiarize yourself with your state’s specifics. Some states allow you to file your state tax return through the same software as your federal return, making the process easier.
9. Stay Organized Throughout the Year
Preparation for tax season doesn’t have to be a burden if you stay organized throughout the year. Try to implement some strategies to stay ahead, like:
- File Documents Promptly: Instead of leaving tax-related documents until year-end, file them as you receive them.
- Use a Spreadsheet: Create a spreadsheet to track income, expenses, and estimated taxes paid throughout the year. This can simplify your record-keeping and make sure you don’t overlook any deductions when tax season comes.
- Set Reminders: Schedule reminders for quarterly estimated tax payments, if applicable, and other important financial deadlines.
- Maintain Digital Copies: Use cloud storage or a digital filing system to keep scanned copies of important tax documents. This can help you avoid the risk of loss or damage to physical copies.
If you need some guidance to put together a general plan for your finances, click here!
10. Understand Your Deductions and Credits
To maximize your tax benefits effectively, it’s important to figure out what deductible expenses and available credits that you can claim on your tax return. Common deductions include:
- Mortgage Interest: If you own a home, you may be able to deduct the interest paid on your mortgage.
- Student Loan Interest: Interest on qualified student loans may be deductible, providing some financial relief if you're repaying loans.
- Medical Expenses: Certain unreimbursed medical expenses can be deducted.
- Retirement Contributions: Contributions to qualified retirement accounts, like IRAs, can be tax-deductible, encouraging long-term savings while reducing taxable income.
11. Use Early Filings to Your Advantage
Once you have all your documents and are ready, consider filing your federal tax return early. Filing early has several advantages:
- Faster Refunds: Early filers typically receive their refunds quicker, especially if e-filing and choosing direct deposit for the refund.
- Reduced Stress: Completing your tax return early means one less thing to worry about as the deadline approaches.
- Time for Corrections: If any issues arise after filing, such as discrepancies or issues with your state tax return, you’ll have ample time to rectify them without rushing.
12. Be Aware of Common Mistakes
Do your best to avoid potential issues with your tax return by making sure you’re familiar with common mistakes that can lead to issues with your return, like:
- Mathematical Errors: Double-check calculations, particularly when doing them manually, to avoid unnecessary mistakes.
- Incorrect Social Security Numbers: Make sure that your Social Security number is accurate, as errors can create problems when it comes to processing your taxes.
- Filing Status Mistakes: Make sure to pick the right filing status based on your marital status, number of dependents, and household situation.
- Omitting Income: Make sure you report all forms of income, even those from side jobs or freelance work, to avoid complications later.
If you’re looking for some more financial guidance, you can use a free online tool like Springfour. It may be able to connect you with resources in your community to help guide you through managing your finances.
If you’re looking for some more financial guidance, you can use a free online tool like Springfour. It may be able to connect you with resources in your community to help guide you through managing your finances.
Disclaimer: The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only, and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through FreshStart Blog or CreditFresh website.
