The adage, “there is nothing certain except death and taxes,” couldn’t be more accurate. Unfortunately, by April 15th, which is the tax deadline, we all must face the task of getting our taxes ready, and then filed each and every year. Thankfully, if you prepare ahead for this inevitable task, it won’t seem nearly as arduous. In addition, if you are fortunate enough to get a refund back from Uncle Sam, the sooner you file your taxes, the quicker you get access to your hard-earned money. Therefore, getting your taxes ready sooner rather than later is overall the most advantageous approach, regardless if you get a refund or have to pay.
Carry Over Pertinent Information With Last Year’s Tax Return
Before beginning the process of filing taxes or even getting your stuff in order to go visit an accountant, take a look at your previous year’s return. Unless you have experienced a great deal of life changes, most of the information will still apply. Your social security number, address, marital status, etc. should all be the same. If you have never filed before, find important documents like your social security card or tax ID number. Also, remember, you need this information on not only yourself, but anyone who is filing with you or who is considered your dependent.
Consider Your Current Tax Withheld Amount
Use this helpful tool from the IRS to determine if you are currently withholding enough money out of your paycheck to be ready for tax time. Have your most recent pay stub and your last year’s tax return on hand to enter into the tool. If you determine you are not having enough withheld from your check, you have two choices to handle the situation. One, of course, is to simply ask your employer to withhold more. The other is to prepare to pay the difference in what you owe on a yearly basis. Of course, the IRS would rather you just adjust your taxes withheld instead of owing them until April 15th, but it’s really up to you. (Some nonpayment penalties could apply if you don’t pay estimated taxes when required).
Know All Your Income Sources
Get all your documentation ready that shows your income sources. Two of the most common forms for you to gather include the following:
- W2: Most employers send their employees’ a W2, which shows in detail their exact earned wages and what you have already paid in taxes to date.
- 1099: If you are a contract employee or freelancer, you will likely get this type of form from the company with which you worked. Notice, you were not their employee. Therefore, you owe the employers and employees’ taxes. Fun! The 1099 form will not show any taxes withheld but will reveal your taxable income (at least until you adjust it for expenses and deductions).
Get Your Deductions in Order
Deductions are the best when it comes to offsetting a tax debt. You could qualify for many, including home ownership deductions, educational deductions, state and local tax deductions, charitable giving deductions or health or medical cost deductions and many, many more. Use excel or another similar program to list specific deductions like medical or charitable giving expenses.
Tax season doesn’t have to be approached with fear or trepidation if you prepare wisely. Take the above suggestions into consideration to get yourself ready for taxes this season.