Tax season is near, and tax planning is considered to be of paramount importance to everyone, including those who don’t file a tax return traditionally. During the Fall season, the IRS generally launches a campaign, ‘Get Ready for Taxes,’ to motivate taxpayers to prepare to file their tax returns. The campaign also includes:
- The actions to be taken before the start of the filing season.
- Things to know before tax filing.
- Ways to get help.
Some key tips for completing the tax returns accurately are as follows.
Key Tips in Preparing to File Tax Returns Accurately
Most people interact with the IRS only when they have to file their tax returns. Others are first-time filers who have come within the radar owing to the new tax credit payments. This year is important for the taxpayers to remain well-prepared and informed. Some key tips for filing complete and accurate 2022-23 tax returns are as follows,
- Gather all the necessary records, such as the 1099s, receipts, W-2s, canceled checks, and other documents that support the deduction of credits, items of income, etc.
- Compile all the year-end documents such as Form 1099-MISC, Form 1099- INT, Form 1099-NEC, Form 1099-G, unemployment compensation, certain Government Payments, Form 1095A, state tax refunds, etc.
- Gather all important information together, develop a software program for electronic records and develop a file cabinet for paper documents.
- Taxpayers should gather all the 2022-23 tax information before filing to avoid processing delays, which could slow down a tax refund.
How to prepare your tax returns and file informational reporting?
The tax filing deadline for the different IRS taxes is April 18th, 2023. But it is wise to get ready for the tax season at the earliest. If you have made some income in the year 2022-23, you will have to file a federal or state tax return, depending on the place you live. Here is a list of useful information that helps you better understand the tax season and the tax filing process and helps you gather all pertinent information to file the returns on time.
- Understand your filing Status:
IRS identifies its taxpayers under five different categories:
- Single taxpayer
- Married taxpayer filing jointly or separately
- Head of the householder
- Qualifying widower
- A widow with a dependent child
Each of these categories of taxpayers will have different tax filing requirements and might qualify for certain credits and deductions. For example, single and married couples filing separately will have a standard deduction of $12,550, and couples who file jointly will have a standard deduction of $25,100.
- Update your name and address:
Though these are basic details, there are chances for taxpayers to overlook this easily. For those, who have divorced, recently moved, got married, or changed their name, this information must be updated with the IRS. If you have changed your name legally, you will have to provide proof of identity, such as a marriage license, government-issued ID, etc. To update the information about the address change, taxpayers can mail their change of address to the IRS.
- Organize all the tax documents:
It is impossible to file taxes if you do not have important financial information available. You must ensure that you receive the paperwork from the employers and gather all your financial accounts under your name. Your W2 Form is the most important piece of information that you will require. If you have worked with multiple employers, you will get multiple W2 Forms from each.
Freelancers must organize all their form 1099 documents and collect business expenses they want to deduct. Other Forms that you will have to collect are as follows.
- Form 1098 – If you are a homeowner and have paid mortgage interest.
- Form 1099- DIV – If you have received distributions and dividends related to the investment. You will receive this Form if you own bonds, stocks, rental property, and another type of investment that generates profit.
- Form 1098-E – This is a student loan interest statement that includes information on the amount of student loan interest paid throughout the year.
- Form 5498 – This Form includes details that the taxpayer contributed to an individual retirement account throughout the year.
- Form 1095-A – This tax Form includes information allowing individuals enrolled in a qualified health plan to get the premium tax credit to offset healthcare costs.
Apart from these tax Forms, if you are self-employed or if you own a small business, you should keep all the credit card statements and receipts to track your expenses accurately. Keeping detailed records throughout the year will help maximize the business deductions, and this will also potentially reduce the tax liabilities.
- Decide on how to file the taxes:
Taxpayers can either choose to pay their taxes on their own, with the help of diverse software options available, but the best option is to entail help from a professional tax-paying service company. Experienced tax-paying service professionals like Tax2efile will help to ease the tax situation and handle the situation exceptionally well. They help with expert e-filing solutions and make sure the returns are filed with the IRS on time to avoid penalties.
- It is safe to file an extension:
The tax season is always the busiest time of the year. If you are still waiting for important tax documents, then you can give yourself a buffer by filing a tax extension. This will earn an additional six months to report the tax returns to the IRS. You can file an extension with the IRS, through Form 4868 and avail extension for free. This will avoid accruing of interest and also avoids penalties. Filing an extent will buy more time to collect all required documents, take time to file returns accurately, and avoid penalties for late filing.
The entire process is labor-intensive and time-consuming, from gathering and assembling all the required documents to understanding one’s filing status and preparing the tax papers for the tax season. But the process need not be stressful for those who plan their tax returns and take help from professional services like Tax2efile.