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Preparing For Tax Season

Posted by Peoples Bank on Jan 3, 2017 8:00:00 AM
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What’s your best strategy for tax season? Preparation.

While your annual tax appointment may be weeks – or months – away,  it’s never too early to prepare for it. Being ready means you can file your return at the earliest possible moment if you so choose. Here are some suggestions to help you get organized this tax season.

Gather your returns

You should receive various types of information you’ll need for your tax return by the end of January. Make sure that the information on each form matches your records. Some of the most common forms you will receive include:

  • A W-2 form if you’re employed or have been employed in the past year
  • Form SSA-1099 if you’ve received Social Security benefits
  • Various 1099 forms to report income such as dividends, interest, cancellation of debt, and more.
  • Form 1095A to report information from health coverage you purchased from the government marketplace
  • Various 1098 forms reporting student loan interest, tuition payments, and mortgage interest.

Note: These are just some of the forms and types of information you may need. Please consult your accountant for a thorough list of forms specific to you.

Find last year’s return

This is of particular importance if you’re using a different tax preparer this year. Last year’s return will remind you – and your preparer – of items you don’t want to overlook.

Have your Social Security numbers ready

Every taxpayer is tracked (by the IRS) through a Social Security number. If you’re dropping off all of your information to an accountant or another tax preparer, make sure to include all of your Social Security information – your number, your spouse if you’re filing jointly, and the ID numbers of your dependents. You’ll also need the tax identification number of the person or business of who watches your children while you’re at work, if applicable.

Get records of charitable donations

You’ll need specific records to claim any write-off for charitable donations that you’ve made. For instance, you’ll need a written acknowledgment from the charity if you’ve made contributions of $250 or more and the letter should indicate that you didn’t receive anything in return.

Review any life changes

Don’t wait until tax preparation day to figure out how any life changes you’ve made in the last year are going to affect your return. Getting married, having children, buying a house, or going back to college will affect your tax status as well as your eligibility for tax deductions and credits.

Are you eligible for tax credits?

Tax credits and tax deductions are two different things. Tax credits, unlike tax deductions, can directly reduce the amount of taxes you may owe the IRS. Some of the most common tax credits are the Earned Income Tax Credit, the American Opportunity Tax Credit, the Lifetime Learning Credit, the Child and Dependent Care Credit, and the Savers Tax Credit.

Are you an independent contractor or self-employed?

As an independent contractor, you should receive Form 1099-MISC (which shows your gross earnings) from the company who employed you. Things are a bit more complicated if you’re self-employed: you’ll need to track down receipts and documentation for all business-related expenses, including mileage expenses and the office equipment and supplies you bought.  

All of the above suggestions are just some of the many things you can do to get ready for tax season. Doing prep work now will make it easier for you to have a successful tax return experience.

Make the smart financial decision to prep your taxes early this year!

 

 

Topics: Tax Preparation