Tax preparers prepare more than 85 million tax returns, as observed by the Internal Revenue Service (IRS). However, those who boldly go DIY on their taxes should remember to keep a record of the receipts, forms, and other documents as they await the next tax season. A little preparation will make you file taxes like the professionals because you're using the same information. The steps below are what professionals do, which can be helpful to a self-preparer taxpayer.
This step is tedious but essential. See it as a checklist for tax preparation to reduce the heavy lifting. Get your files in one place as you prepare to file your taxes. The practice will mitigate the entire process by reducing the back-and-forth pattern due to missing items. Here are some essential documents for tax matters:
W-2 or 1009 forms
Investment earning statements
Mortgage interest documents
Many situations can happen which will require other documents like changing your name or relocating. Instead of worrying how these changes can mess with your tax filings, focus on early preparation by organizing the correct forms. Here are some documents for tax filings.
SS-5 forms are required for name change.
W-4 forms are required for tax adjustment especially for household income withholdings.
8822 forms are required for relocated taxpayers.
Preparation is something you must do every tax season. Make sure all documents and forms are in one place at least by the beginning of February.
Tax filing only has two options, and both come with ups and downs, that you must know. You have to choose between itemizing or standard deduction to file your taxes. Keep in mind that tax deduction is a method of lowering your taxes. For example, 2020 standard deduction for single filers was $12,400 and joint filers were $28,400. However, with the itemizing method, you can reduce more than the maximum limits listed above but with the correct documents. You have to gather receipts to prove your expenses, such as:
Receipts for education expenses
Medical and dental expenses receipts
Childcare expenses receipts
Charitable donation receipts
After choosing the method of filing your taxes, the next is to select a filing status. You are either single or married because each status has its pros and cons. Your tax status determines the process you'll use in filing your taxes. There are five options to choose from:
Single: this is for individuals with no ties to the other four statuses.
Married filing jointly: this is for couples deciding to file their taxes as a joint entity.
Married filing separately: this is for couples separated or divorced who use the single filing system for their taxes.
Head of Household is meant for the home's breadwinner with a wife and dependents.
Qualifying widow/widower: individuals who have lost their partner and dependents.
Now with everything in hand, you can begin with your taxes. More than 50% of Americans seek a professional's help; others use the old school method, which is by paper mail, while 43% file taxes using the software. The online software is easy to use. It is created to reduce tax complications and decide which method is better, itemizing or the standard deduction.
Don't sit, relax and wait until the dying minute to prepare for the tax season. If you hope not to involve the professionals, an early start will inform you what to do. Besides, early preparation and filing reduce stress and protect you from tax fraud.
FOR MORE INFORMATION ON HOW JIM McCLAFLIN, EA, NTPI FELLOW, CTRC CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLlICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
Jim McClaflin, EA, NTPI Fellow, CTRC