As the saying goes, if you fail to prepare, you prepare to fail. This is especially true of tax filing.
When it comes to filing your taxes, doing so on time is of utmost importance. Preparing to file your taxes to the internal revenue service (IRS) in a timely manner helps you avoid the last-minute stress of running around during tax season and can help you receive your tax refund earlier.
Here are 5 tips on how to get a head start on your taxes way before the filing deadline:
1) Collect your records ahead of time. Make sure you have your W-2 and 1099 forms as well as copies for your filers if you plan to work with tax preparation professionals. All necessary forms are available on the IRS website. Additionally, make sure you include records from all sources of income, including freelance work, outside investments, or even tips from side jobs.
The best way to gather your records is to file your records away gradually over time so that you don't have to sift through misplaced documents all at once, especially if you have documents related to tax deductions and credits. Keeping track of your records in one place and having them ready in advance ensures that you don't miss out on any tax reductions you might be eligible for.
2) Keep track of your income. This includes both your taxable income and adjusted gross income, which is your income minus certain tax deductions. Knowing these values can help taxpayers to not only file the correct amount but also be aware of various credits and deductions that can apply.
For example, depending on adjusted gross income, it's possible for students to deduct up to $2,500 in interest payments on their student loans. These types of credits and deductions are important to make note of, especially if you're a first time tax filer.
Another important deduction to be aware of are those stemming from charitable contributions. Generally speaking, charitable donations are usually able to be categorized as a standard deduction if itemized in the filing process.
3) Choose the way you want to file your tax return. There are many tax preparation options available, including an IRS free file program, IRS online forms, tax softwares, or finding a tax preparer. While some people may prefer to file their own taxes, others may feel more comfortable paying software systems or professional tax preparers to handle their tax filing.
Tax preparation softwares and tax preparers most likely have the best chance of producing the least amount of errors, which can save you a lot of time and money. However, if you choose to hire a tax preparer, make sure that they are trustworthy, as you'll have to provide them with a good amount of personal information and financial statements.
4) Make sure you understand your tax return. Unfortunately, the act of tax filing is anything but mindless. It takes great attention to detail to file your taxes properly and ensure that no mistakes are made. Read through your tax return to understand more about how your taxes work and feel confident about your math. If there's something you're unfamiliar with or don't quite understand fully, be sure to use the online resources available on the IRS web page.
5) Last but not least, don't be afraid to take your time. When you rush, you're more likely to make mistakes, which can cost you in the end. Take time to check over your numbers and confirm your math so that you can take a deep breath and feel confident about your tax payments.
Taking the steps to file your taxes in advance can save you the headache of trying to figure it all out too close to the deadline. Being prepared can also save you extra costs or penalties that come with late tax payments.
In the event that you don't have as much time as you thought, you have several options for last-minute help, including:
- Downloading forms or publications from the Tax Tools section of the IRS Forms page.
- Payment options for if you face trouble paying your tax bill.
- A 6 month extension for if you need more time to file your tax return - It's called Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. While this extension will grant you more time to get your paperwork to the IRS, it does not extend the time you have to make a tax payment. If any amounts remain unpaid by the tax deadline, a late payment penalty will be enforced if less than 90% of your total tax has been paid, and interest will also be applied.
Need help filing your tax return? Our professionals at Sorge CPA are here to help! Contact us today to get started.