As the tax season deadline approaches various questions will start popping up in your mind. How should you do your taxes this year? Will you receive a tax refund or a bill? How much time and money will it cost to file?
Taxes are often a very stressful topic for everyone -- and with good reason. Filing your tax return can be completed a number of different ways using various methods. In order to simplify your taxes and reduce stress, use this tax checklist for getting started.
Depending on your personal tax situation you may only have a W-2 to track down during tax time. Or your situation may be more complicated and require several tax documents and loads of receipts. Start collecting all documents, papers and receipts in one place throughout the year, such a file folder. That way you can reduce stress and save time when tax season rolls around.
► Here’s a list of the income documents you may need to collect.
W-2 from your employer
1099-K from sales via PayPal
1099-MISC from freelance clients
Personal income receipts not included above
Interest earned from savings or CDs
Dividends from sales of stock or property
Income from other sources, such as pensions, IRAs, Social Security
Income from rental property or royalties
► In addition, now’s a good time to gather all records of tax deductible expenses you are eligible to claim.
Interest paid on a mortgage
Donations made to charities
Medical expenses or health insurance premiums
Childcare and daycare expenses
Job-related expenses, including job search costs
Tax preparation fees from the previous year
Mileage and use of vehicle
Costs for starting or maintaining a small business
Now that you’ve had a chance to gather all your income and expense documents, the next step is to organize your bookkeeping software. Start preparing your year-end financial reports and categorizing all expenses. You’ll likely need a profit and loss sheet, expense report and a summary of accounts receivable and accounts payable if applicable.
Start by categorizing all of your income sources as well as expenses you made throughout the year. The IRS will charge you a fee if fail to include all the income attributed to you during the year -- even if you never received a tax document to file. It’s still your responsibility to report all the income you earned.
Likewise, you don’t want to pay more taxes than you have to and keeping a good record of your expenses will help offset any tax bill.
Source: Tom's Guide
The next important step in simplifying the tax filing process is to choose the right tax filing service. If you feel comfortable filing your own taxes, there are several DIY software options to choose from, such as TurboTax and H&R Block Online.
If you need more customized help, seek out a tax professional or CPA who can help guide you through the process of preparing your taxes correctly. And remember, the cost of tax prep fees are tax deductible so don’t skimp on quality tax help just to save a few dollars.
If you need help choosing the right tax filing service, the IRS has a list of recommended efile services on their website, some of which are free. In addition, you can use this online questionnaire to help accurately determine the best free file tax software.
Source; Jackie Gibbins Orange County Real Estate
Throughout your life you’ll experience various changes that will affect your tax situation. Some of these life changes will qualify you for different tax deductions and credits that go towards reducing your overall tax burden.
► Here are some life events you’ll want to make note of.
Getting married or divorced
Have a new baby or losing a child
Buying a new home
Moving to a new state for a job
Going to college
Opening a retirement account
Starting a new business
Losing a spouse
The happenings in your life will determine your filing status and how much (or little) taxes you’ll end up paying. So it’s important to thoroughly review any life-altering events you may have experienced in the past year.
Source: Quicken Loans
After using this tax checklist to get started it’s time to make an appointment to file your taxes. Set aside time in your calendar to organize, prep and input the numbers into your tax software. This may take a few hours, or even an entire weekend, so it’s important not to wait until the last minute.
Rushing through the tax filing process can cause errors and mistakes that can result in your tax return getting rejected or delayed. On top of this the IRS may charge you a late filing fee or other penalty for not filing your tax return correctly, so take your time to double check the information before hitting the “submit” button.