If you’re not comfortable doing your taxes, you might be feeling at least a little bit of anxiety right about now… That’s why we put together this list of 9 things to do before filing your taxes.
1. Gather all of your information.
Organize important documents including but not limited to: pay stubs, bank statements, W2, 1099 forms, mortgage and tuition statements. Make sure that all of your records are current and accurate by highlighting dates and vital details. Place all forms in a safe yet easy accessible location.
2. Identify a reputable tax professional.
Stand clear of individuals that promise you lower fees to prepare your taxes in exchange for a higher tax refund. Do your research and check for referrals, testimonials, and consumer complaints to identify the best tax firm, tax preparer or software that meets your individual needs.
3. Review or update your filing status.
Many individuals file the same from year to year. However, there are often changes that occur in our life that we miss during tax season. A few questions to ask yourself are: Have you recently gotten married or divorced? Do you have children now? Are you caring for your elderly parents or other family members? Consider any changes in your filing status before filing your tax return.
4. Complete a self-audit for any claimed deductions.
Store all documents as proof of your tax breaks. Some that are most common are: Use of a business vehicles, Business deductions (tools/systems), Home deductions, or any other deductions that may be deemed as a red flag to the IRS. Save any documents for up to three years for easy access in the case that you are requested to provide valid proof for your proposed deductions.
5. Reduce the amount of your taxable income by reviewing the following contributions:
- Records of medical savings accounts
- Self-employed health insurance accounts
- Details on IRA contributions
- Documents that reveal moving expenses
- Educators: Classroom school supplies
- Qualifying home improvements
- Alimony payments
6. Visit irs.gov for up to date information and resources.
Get in the habit of being acknowledgeable about items that can be considered as deductions, write offs or essential tax bracket updates that you may not be aware of. Avoid leaving this responsibility solely up to your tax preparer.
7. Document charitable donations.
If you plan to claim monetary donations or supplies that you have donated to non-profits, be sure that you have written acknowledgement from the organizations. Details that will need to be included are:
- Name of the organization
- Description of the property or cash amount donated
- Value of any goods received. If this number is less than $250 be sure to keep records to validate your donations
- IRS exempt number of the organization as a valid 501(c)(3) non-profit
8. Start saving.
Begin to save up some cash to compensate your tax preparer and in the case that you have to pay back Uncle Sam. On average the cost for a certified professional to finalize your tax return is $additionally, failing to pay what you owe back to the government leads to owing more in interest and other tax penalties. Avoid this by starting to place back extra funds each time you are paid to reduce tax shock, while avoiding a financial set-back. You won’t regret this.
9. Consider and plan for tax extensions.
Determine early on if you will need a tax extension. The deadline to file your 2017 tax returns will likely be on Tuesday, April 17, 2018. Make all attempts to avoid filing for an extension due to inability to pay back any owed taxes. More valid reasons are:
- Inaccurate or missing information
- Unexpected life events (unemployment, family deaths, etc.)
- A recent move to a new state
- Unresolved tax issues from previous years
With these 9 tips, you’ll be on the way to getting your tax refund in no time. Best of all, if you direct deposit your tax refund into an account like your reloadable Green Dot prepaid debit card, you’ll get your money faster than a paper check!
This is a post in partnership with Marsha Barnes, of the Finance Bar. Green Dot has supported her with compensation for her financial expertise and blog contributions.
The views and opinions expressed here are those of the author and do not necessarily represent the views of Green Dot Corporation.