Believe it or not, tax season is officially here. While it is completely understandable to avoid thinking about taxes until you absolutely have to, taking a few preemptive steps can keep you organized and help reduce stress. Whether you file your taxes using tax software yourself or work with a tax professional, check out the tips below to confidently tackle your taxes this year.
Step #1: Gather all of your forms & documents
Prevent last-minute scrambling by organizing all your tax documents. Here’s a summary of the tax documents and the information you’ll need:
- W-2s (from your workplace)
- SSA-1099 (summary of Social Security benefits)
- 1099s (if you have additional income, interest, gains/ losses)
- 1099-Rs (if you receive income from pensions, annuities, and retirement accounts)
- 1095-A (if you have government marketplace health coverage)
- 1098s (students receive a summary that reports interest and tuition payments)
- W-2Gs ( if you have gambling winnings, yes, you also need to report this)
- Schedule K-1s ( used for partnership income, trust income, and company ownership)
- Letter 6419 – ( if you have children, this reports Advance Child Tax Credit Payments)
- Letter 6475 – (if you received any federal stimulus payments, this reports the Economic Impact (stimulus) Payment)
Step #2: Schedule out a date to file
Remember the deadline to submit your taxes is April 18, 2022. Secure an appointment with your tax preparer. If you plan to do your taxes yourself, make an appointment with yourself and anyone else (spouse). By scheduling time ahead, you avoid rushing last minute and have ample time to finish filing and review it before submitting it. You will need anywhere between 1-3 hours to complete it, depending on the complexity of your situation. Also, the sooner your taxes are submitted, the sooner you will receive your refund.
Step #3: Collect all your receipts
This is probably the most painful part of filing your taxes, but start to gather all your receipts for expenses that were used toward your business to write off on your taxes. Some examples of receipts or records of expenses for business expenses are stationery, home-office costs, medical expenses, etc. Check out Schedule A and Schedule C for more details on what is acceptable. If you are a student, collect receipts of things used toward your education. Luckily, bank statements, credit card statements, and anything else digital and physical that demonstrate payment for items are all valid ways to show a record of expenses and should be easier to acquire.
Step #4: Reach out for records of charitable contributions
If you made any donations to a tax-exempt organization, you can write it off as a charitable contribution. Traditionally, it was only acceptable to itemize your deductions in your tax form, but because of CARES Act, you can now choose a standard deduction to write off up to $300 in charitable contributions. Reach out to the organizations you donated for a record of your tax-deductible contributions, most churches and fundraisers are able to provide this information.
Step #5: Get a copy of your last tax return
Recollect last year’s copy of your tax return. Having an old copy will provide you with a source of reference so you do not overlook something you did previously. If you used a tax preparer, ask for a copy of your tax return, and compare it against the new one to ensure nothing has changed (and if it did, you understand why), and you did not miss anything that should have been recorded.
Step #6: Remember to fund your IRA
If you have an IRA retirement account, you have until April 15, 2022, to fund it. This contribution can help lower your taxable income. The limit is $6,000 ($7,000 if you’re over 50) for the 2021 tax year. Don’t miss this opportunity to lower your taxable income.
Image Source: Constantine Johnny/Getty