How to Prepare for the Tax Filing Season – Tips for YouApril 1, 2023
The IRS expects every taxpayer to submit their tax returns and pay what they owe on time. As you know, tax filing is not a simple affair and involves a lot of documentation and calculations. And that is why the IRS gives taxpayers several months to prepare and submit their tax returns. They also allow for an extension period to file taxes to ensure no taxpayer is left behind. If you don’t comply, IRS can impose heavy penalties or even take tax collection enforcement measures against you. To be on the safe side, here are some tips to ensure you are ready for the tax-filing season.
Gather your documents
Even if you want to hire a tax preparer to prepare and submit your tax returns, you still have some work to do – gather all the documents and receipts required. You need documents from your employers such as W2 form to show your income and withheld taxes. If you are in business, you need bank statements and forms 1099 that show your earnings. There are various forms of 1099 such as form 1099-DIV for dividends, form 1099-INT for interest, among others. When it comes to deductions, you need to have receipts to back up your claim. Gather the receipts and determine whether to itemize your deductions or take a standard deduction.
Carefully look at tax credits and deductions you are entitled to
If you want to reduce your tax bill or even get a huge tax refund, you need to take advantage of all tax credits and deductions you are entitled to. Earned Income Tax credit, American Opportunity Tax Credit, energy tax credit, among other are some the credits you can claim if you qualify. When you look at all the credits and deductions available to you, choose the ones that lower your tax bill or even increase your tax refund. Use tax calculators to get an estimate of the tax credits and deductions. For instance, in case of EITC, use earned income credit calculator. The information will help you estimate your tax bill or tax refund.
Do the math
It’s always important to calculate to know how much you owe or what the IRS owes you in tax refund. This will help you plan how you will pay the tax bill or how you will spend the tax refund once it hits your bank account. Just use online tax calculators for the math. For tax credits, you can use earned income credit calculator which will give you exact amount of tax credit you are entitled to. Also, use a trusted tax calculator to calculate your taxable income and tax bill or tax refund.
Find a tax preparer – tax prep software the best option
Tax preparation can be a complicated and stressful process. You can avoid the stress by hiring a tax preparer. The tax preparer will ask you for personal information and all the required documents, and will do the rest. If you don’t want to work with a tax preparer, just look for a tax preparation software. It’s easy, fast and convenient.
Don’t be afraid to file for an extension
If you notice that you can’t complete filing your tax returns by the deadline day, you can file for an extension. However, to avoid penalties, you should estimate your tax bill and pay it before the deadline. It’s advisable not to rush the tax preparation or filing process because that may contribute to common errors such as spelling and calculation errors.
The above tips will help you prepare and file your taxes on time. In today’s digital world, it’s always advisable to use a trusted tax preparation and filing software. It’s easy and fast. Hiring a tax preparer is another option, but the most important thing is to provide accurate information.