Tax Season 101Date posted: 3/21/16 09:00:00 AM
Tax season can be stressful, but with preparation and organization, you can make this time of year hassle-free. As a taxpayer, determine how to approach your taxes with the documents you need to prepare, how early you should complete taxes and what you can expect after the process is complete. Familiarize yourself with these aspects of doing your taxes and feel more confident moving forward.
HIRE A PRO OR GO SOLO?
There is not one answer that is right for everyone. Because tax circumstances vary among individuals, you must research available options first.
If you decide to self-file, many different types of tax-preparation software programs are available. The Internal Revenue Service (IRS) indicated that households with a gross income under $62,000 may qualify for Free File. Free File is a service available through the IRS that will allow you to electronically file your federal tax returns without a fee.
Self-filing might be a good decision if you are:
- Familiar with your current tax situation.
- Organized and have a system in place for keeping all critical documents.
- Prefer privacy when it comes to your financial situation.
- Capable of, and comfortable with, doing your own research.
For individuals who have a more complicated tax situation, hiring a professional is likely the best option. There are many different types of individuals you can hire, including:
- A tax attorney
- A certified public accountant
- A franchise tax service
- An enrolled agent
While the cost of each option varies, hiring a pro may wind up saving you more money on your tax bill. Also, if you’ve had a major change in your life recently, such as having a child or getting married, hiring a professional with expertise in the field is likely the most appropriate decision.
After you’ve become familiar with the advantages and disadvantages of working with a professional or filing taxes on your own, you can feel more confident moving forward with your decision.
PREPARE SO YOU CAN SLEEP ON STORMY NIGHTS
Whether you are filing your taxes on your own or enlisting the help of a professional, you will need to prepare and organize the same documents. If you are not prepared, you risk receiving your tax return later in the year, or not having the documentation you need to file.
To help you during tax season, it’s a good idea to remain organized throughout the year. Purchase a filing cabinet or file folder to keep all documents in one place. Keeping documents organized is critical for a smooth tax season.
Some documents you should gather include:
- W-2 from your employer.
- 1098-E if you’re paying back a student loan.
- 1098 if you are a homeowner.
- The appropriate 1095 forms if someone in your family had health coverage in 2015.
- The appropriate 1099 forms, if applicable, for any additional income.
In addition, you’ll want to bring along any paperwork that may get you a tax break, such as a donation to a charity. For additional information on the documents you can expect to use or need, check out the IRS’s informational page. This document list varies and is unique to each individual completing his or her taxes this year.
Taxpayers must claim all W-2 form income on their returns in addition to income that they received on a 1099 form. If you are waiting on any paperwork from an employer or someone else to do your taxes, reach out to the party responsible for getting you those documents to ensure you do not risk filing taxes late.
COMPLETE TAXES AHEAD OF TIME
There are many benefits associated with completing your taxes as early as possible. These range from greater protection against identity theft to getting your refund earlier, if eligible, so strive to complete your taxes sooner rather than later.
A paid preparer will prefer to get your taxes done quickly—as soon as you receive your income documents in January if possible. In addition, if you expect to receive a refund after completing your taxes, finishing this task earlier when the IRS processing centers are less busy will ensure your claim is processed more quickly.
If you find that you might miss the regular tax filing deadline, you can file for an extension. Make sure you do this as soon as possible to obtain the highest return and to avoid late-filing penalties, noted Turbo Tax.
The last day you can file your tax return or file for an extension is April 18, 2016, rather than April 15. Washington D.C., will observe Emancipation Day on April 15, 2016 which changes this year's deadline. Taxpayers in Maine and Massachusetts have until April 19, 2016 to file taxes, due to Patriots' Day being observed on April 18, 2016. Your extension will give you an extra six months to file your taxes, but you will still need to pay your taxes on time. You must pay the amount due using the Form 4868. By ensuring this is paid, you can guarantee approval for automatic extension.
EXPECTATIONS AFTER COMPLETING TAXES
After completing your taxes, your first questions will likely be when you will see your refund or whether you owe money. The answers to these queries can vary a great deal, so making sure you do your taxes on time and you have remained organized throughout the process is critical to ensure a smooth process throughout. Some factors that impact when a refund is issued include:
- If the refund can be directly deposited into a bank account.
- If you request a mailed check.
- When the IRS accepts your return.
There are also tools offered through the IRS that allow you to track your refund depending on your unique situation. However, before you get caught up in tax refunds, the U.S. Government’s official web portal provides recommendations on what you need to do after filing your taxes. You will want to print or request copies of your tax returns and transcripts for your record. If you owe money after completing your taxes, make sure you settle these disputes as soon as possible. Tax season may seem like a stressful time of year, but by preparing yourself and knowing a little bit about the process, you can feel a little more confident with the process.
This content is for informational purposes only and is not for the purpose of providing legal or tax advice.
- Winterizing your home and finances - 12/12/17
- Retirement plan options - 11/29/17
- Best time to buy a car: December - 11/29/17
- 6 sustainable ways to save during the holidays - 11/9/17
- Steps that can help prevent identity theft - 11/2/17