Tax season is still a few months away, but it is never too early to start personal income tax preparation. What you do today will help reduce stress when April rolls around.
Individual Income Tax Preparation in 3 Simple Steps
1) Receipts and Documents
The first thing to do is get organized.
There are certain crucial documents you will need to have on hand in order to file a tax return. Finding them now will help you avoid unnecessary anxiety when the tax deadline gets close.
What you need to File Taxes
- Last year’s tax return
- Forms W-2 from employers
- Forms 1099 that list other sources of income, such as interest, dividends, contract work or freelance employment
- Form 1098 that shows mortgage interest and property taxes paid
- Form 1095 documenting health insurance coverage
- Form 1099-INT for investment interest earned
- Receipts for charitable contributions
Once you have found all these documents, put them all together in a safe spot. Then, you will have no trouble finding them when you are ready for the next step of income tax preparation.
2) Filing Status and Tax Withholding
As you prepare for tax season, you will also benefit from double-checking your filing status and tax withholding.
If you have had any major life changes in the last year, you should take a second look at your filing status. For example, those individuals who got married or were divorced in the previous year might need to make a change.
Withholding is another type of tax status that is worth reviewing periodically. The Tax Withholding Estimator from the IRS can help you determine if it’s in your best interests to have the government withhold more or less money from your paycheck.
Both filing status and withholding could potentially have major tax implications.
3) New Tax Laws and Rules
Income tax laws are constantly updated. Whether a major tax overhaul or lesser-known IRS regulations, savvy taxpayers can save big money simply by staying on top of the news.
Tax Info you Need to Know
- New tax credits and deductions
- The Tax Cuts and Jobs Act
- State and Local Tax (SALT) Deduction Caps
With income tax preparation season just beginning, it pays to take a moment to become more educated about tax laws and rules. Learning about even just one new tax credit or deduction could help you earn a bigger refund next year.
Need Help? Contact a Local Tax Preparer
Whether you itemize or take the standard deduction, tax prep can be a lot of work. Fortunately, it’s something no one has to do alone. If you would like assistance with individual tax planning and preparation, contact a local accountant.