The Ultimate Tax Preparation Guide
If you haven’t filed your taxes yet, here is an easy tax preparation guide to help you get started.
1.Gather Important Documents and Information
Some documents like W2s or 1099s are mailed, but you may be able to expedite the process by accessing them online.
Here is a checklist of documents and information required to file:
- Social Security numbers or individual tax identification numbers for you and others listed on your tax return.
- W-2 and 1099 forms for all sources of income, including investments.
- Previous year’s tax return paperwork
- Paperwork supporting tax credits and deductions (dependent care, homeownership, healthcare, education, etc.)
- Your checking account and routing number to receive your refund through direct deposit.
2. Determine Your Filing Status
Your filing status affects whether you are required to file a tax return, your potential refund, your standard deduction amount, tax credits available, and/or the amount of tax you’re required to pay.
5 Tax Filing Statuses:
- Married Filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er) with dependent child
How Tax Credits and Deductions Work
The IRS allows you to claim certain tax credits and deductions when you file your tax return.
- Tax Deductions: Can reduce your taxable income.
- Tax Credits: Can reduce the amount of tax you owe.
Should I Itemize Deductions or Take the Standard Deduction?
Itemize: The IRS states, “you should itemize if your allowable itemized deductions are greater than your standard deduction, or if you must itemize deductions because you can’t use the standard deduction.”
Standard Deduction: According to the IRS, “The standard deduction is a specific dollar amount that reduces the amount of income on which you’re taxed. In general, the standard deduction is adjusted each year for your filing status, whether you’re 65 or older and/or blind, and whether another taxpayer can claim you as a dependent.”
3. Filing Your Taxes
Thankfully, filing your taxes is easier than you might think.
Ways to File Your Tax Return:
- Electronic Return (e-file or IRS Free File): Submitted online, e-file refunds are processed more quickly than mailed returns.
- Paper Return: if you can’t or don’t feel comfortable with electronic filing, you can mail your paperwork to the IRS.
Those with income below $12,950 for single filers and $25,900 for married couples filing jointly, may not be required to file a return, notes the Consumer Financial Protection Bureau.
Unless you file an extension, most federal and state income taxes are due by April 18,202
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This information is for illustrative and informational purposes only. It is not intended to be tax, legal, or financial advice. For tax advice consult an advisor or tax professional.
Information published by SavvyMoney.