Don’t wait to prepare for taxes this year. Getting prepared and taking care of some documents can help you save time, money, and stress. Take a look at some of these tips to prepare yourself for tax season this year.
Note: this is for educational purposes
Gather all your documents
When it comes time to prepare for taxes you need to have all your ducks in a row. That means having forms like your W-2, 1099, charity donation documentation, receipts, and asset documentation. These items, and others, are going to help you report all of your money and assets to the IRS, which is required by law. You will also need to have any documentation of any outside money you have earned when you prepare for taxes. Having this documentation is the biggest part of tax prep and can make the process much easier. That includes whether you hire a CPA or do it on your own. Notably, this documentation can help you get the most out of your credits and itemized deductions.
Things like receipts from medical bills and business expenses are going to lower your taxable income, which means you will pay less in taxes. Reporting things like gas expenses, education expenses, property tax, and others can all have an impact on your itemized deductions. Credits, on the other hand, can be given out depending on certain factors such as having children (child credit), going to school full time (American Opportunity) credit, and other factors. Working with a financial advisor before your taxes are done can help ease the burden of knowing what all credits and deductions you qualify for.
If you find it hard to keep up with physical documents try using a file manager app.
List out any investments you have
While you prepare for taxes it’s important to list out all your investments. That includes retirement accounts such as IRA and 401k. Whether personal or provided by your employer contributing to your retirement in an IRA, both can be deducted from your income. This may make tax preparation become more difficult depending on the amount you are contributing, and other factors. If you do have a retirement plan it can be beneficial to contribute the max as it can lower your taxable income. Don’t over contribute, though, as there can be penalties.
In addition, you will also need to prepare for taxes by listing out your investments in other accounts such as college funds, and specific savings accounts. Don’t leave those documents out as you can be penalized by the IRS.
Have a copy of last year’s return
This is directed towards those with a lot of assets and who use a CPA firm. Having a copy of your last year’s tax returns can help tremendously with getting your financial statements in order and preparing them correctly. Even if you are going to use an online service, you can still upload last year’s tax return to fill in portions of your tax return. This just speeds up the process of your filing your taxes.
Have identification for each member of your household
When you prepare for taxes make sure to have all documentation of your children and spouse. This will determine a couple of things:
- Whether you should file separately or jointly
- How many dependents you can claim
- Tax Credits
This is in addition to the other paperwork you file. Bring items like social security cards and driver’s license numbers. Also, if you just had your first child include medical bills and hospital costs that were not covered by insurance.
Meet with a CPA
So maybe you have been doing your taxes on your own for a while, but you just switched jobs or came into some new assets. A CPA can help make sure you file correctly with the accurate information you need. Vitally, they also know the tax code better than you do. They can help make sure you get the most itemized deductions, credits, and pay less in taxes. If you leave your taxes up to some computer algorithm you may be losing out on money because you didn’t properly file something. Also, if you own multiple assets and have your money tied up in multiple ventures and investments it is paramount to hire a CPA. A CPA will help you make sure your assets are filed correctly and they know what can be deducted from your income. Why leave money to chance?
Looking to prepare for taxes but need a professional’s touch? Sheffield, Trackwell, and Rapp have the experts and knowledge to get you the most out of this next tax season. Contact us today and let us help you file properly.
