Tax season is just around the corner! To start tax preparation, make sure you begin to gather important forms needed to file your taxes. Read on for tips on what you should be doing to prepare.
The Importance of Tax Preparation
Tax preparation is important to help you get organized and save time and money. Even if you hire someone else to help with the tax preparation process, you will still need to do some work yourself.
Tips for Tax Preparation
1. Gather Documents
The first step to tax preparation should be organizing and gathering important documents from the past year. Some of the most common forms you will need are a W-2 Form, Form 1098 if you’re reporting any mortgage interest you have paid, and various 1099 forms that report other income you have received.
2. Track your Income
Some individuals have various sources of income, so it’s important to have records of each document. Some forms you will need to include are the Form W-2 for wages and salary, Form 1099-G if you are unemployed and receiving unemployment benefits, Form-2G for any earnings from gambling and lottery winnings, and Form 1099-Misc for compensation from freelance work.
4. Determine if you’re Filing Federal or State Return
The way you choose to file can impact the types of returns you need to file. This is determined by your age, income earned minus any deductions, and filing status.
5. Gather All your Receipts
Round up all your receipts to figure out whether you need to itemize your deductions or claim the standard deduction. This is determined by adding up your itemized deductions and comparing them to your standard deduction. You should also look for receipts for medical records not covered by insurance, investment-related expenses, and charitable donations to produce a greater write-off.
6. Plan for Any Refund
During tax preparation if you are expecting to get a tax refund there are several ways to receive it. The government can send you a check or deposit directly into you savings account. Also, you can use the refund towards next year’s taxes or distribute it to other accounts (IRAs and education savings account).
The earlier you start on your tax preparation, the more time and money you’ll save. Tax season can be stressful, and if you’re not sure where to start, hire an accountant to assist you through the process. If you’re seeking financial help, the experts at Satty, Levine & Ciacco, CPAs, P.C. can assist you. Visit our website today to get started.