26 things to do now if you want to file a tax return on time
Taxes are a frustrating fact of life for most people, but planning ahead can make things a little easier. Tax professionals and other financial experts have compiled a list of everything that needs to be done now in order to have time to file a return without any problems by April 15th. Writes about it GoBankingRates.
View your previous year declaration
Expert Gisele Goes recommends taking the time to examine your tax information for the previous year.
Your tax returns for the previous year will give you some idea of what information you need to collect now. Pay particular attention to your sources of income, deductions, and expenses, which are likely to be similar this year.
Summarize what has changed since last year's filing
Answer the following questions: Have you changed jobs? Have you got married? Do you have a baby? Have you changed the bank or investment companies? Refinanced a mortgage?
Review your list of expenses and deductions and evaluate what has changed over the past year to remove redundant information or add new ones.
Make sure your ITIN is not expired
If you are applying with a tax identification number (ITIN), make sure it has not expired. You can update the ITIN using the W-7 form, but this process may take some time, so it is better to check the validity period in advance so that the expired ITIN does not ultimately cause a delay in submitting a declaration.
If you are a business owner, prepare the documents that your employees will need.
It is important for the business owner with employees and freelancers to prepare and send in time all the tax documents required by the employer that employees need to fill out their declarations.
Determine what tax deductions and loans for business you can apply for.
Some of the tax benefits you can qualify for include small business health insurance. Costs that you can deduct include home office, travel, and the cost of vehicles used for business. Make sure that you have records confirming your rights to these deductions and that you also understand the IRS rules and requirements regarding reporting on these items.
If you are a freelancer, make sure your employer has your exact contact information.
All taxpayers working on freelance services should check once again whether their employers have their current contact information, in particular their mailing address, so that the freelancer can receive form 1099 on time.
On the subject: 7 important facts about tax refunds in 2020
If you are 2019 and a half years old in 70, don't forget about RMD
If you are 2019 and a half years old in 70, you should receive RMD (Required Minimum Distributions) for all your retirement plans, including IRA, 401 (k), SEP, and others. The first payments should go to you on April 1, 2020.
This does not apply to those who are 70 and a half years old after January 1, 2020.
RMDs are the amounts that US tax law requires to extract annually from traditional retirement investments and employer-sponsored retirement plans.
Make a list of all your sources of income
Your sources of income may include self-employment, unemployment benefits, retirement benefits, or a typical W-2 form from an employer.
There are many areas to consider, and now is the time to make a list of all sources of income. You need to consider income from rent, savings, investments or dividends, as well as other sources: income from gambling, income from hobbies / side activities, trusts, prizes and even child support.
Freelancers must also consider income not reflected in forms 1099
Taxpayers should remember that any taxable income must be included in the declarations, including one for which forms 1099 are not generated. For example, if you earned less than $ 600 for freelance work, the company you worked for does not need to send you form 1099. Instead taxpayers must report this income on their own.
Gather and organize all the necessary documents
The best way to get a good idea of your taxes is to organize your paperwork. Having all the tax documents in place is critical to filing an accurate tax return. Failure to do so can result in you missing out on tax credits for which you are eligible.
The paperwork you will need will depend on your specific situation - whether you have dependents, whether you are self-employed or not, etc.
Experts advise creating your own personalized tax document checklist so you don’t miss a thing. It's better collect all documents in one place.
If you receive tax forms electronically, create an electronic folder where you can store any emails or other electronic information that you may need.
You can start the process by collecting non-financial data that you will need: social security numbers and dates of birth of all those indicated on the declaration.
Collect receipts for everything you plan to deduct
Before preparing the declaration, you should make sure that you have collected documents confirming all your expenses and receipts to ensure that you take into account all possible deductions. All these little things add up quickly and help reduce taxable income.
Don’t forget about charitable contributions and medical expenses.
Keep receipts for tax-deductible charitable donations and medical expenses handy - these expenses can help you get a bigger tax refund.
Pay attention to the new extenders
Some of the extenders are tuition deductions of up to $ 4000, mortgage debt relief of up to $ 2 million, an increase in the lower threshold of medical expenses to 7,5%, energy efficient loans and tax breaks for victims of natural disasters.
Contribute to retirement accounts to reduce taxable income
There is still time to make contributions to some retirement accounts, and they can still be included in the 2019 declaration.
You can deposit funds into a Traditional IRA up to the April 15, 2020 tax filing deadline to lower your taxable income for the 2019 tax year.
Contribute to other accounts that may reduce your taxable income.
In addition to the traditional IRAs, you still have time to contribute to other tax-efficient accounts, such as health savings accounts and a single 401 (k). They can be replenished until April 15, 2020, and the money deposited is deducted from the taxable income for 2019.
Invest in accounting software
John Bradshaw, president of Appointment, argues that having accounting software helps ease the task of tax reporting.
“Make sure the software is linked to your bank account and business credit cards so you can quickly download all of your financial data and speed up the process,” he said.
Or hire a tax specialist
If you would prefer a professional to prepare your declaration, now is the time to hire someone to be your tax consultant and preparer.
After familiarizing the consultant with your finances, you should draw up a strategy of deductions and the correct filling of documents with him.
Check all tax forms carefully
If you start preparing to file a declaration in advance, you will have extra time to double-check that everything is done correctly.
On the subject: Taxes and Jobs: How Immigrants Affect the US Economy
Do not just rely on an online program or even your accountant. Take your time, check all your information and carefully read each line. Filing a wrong declaration can result in overpayments of taxes, lack of deduction or a fine.
Check if you can apply electronically for free
Taxpayers who earned up to $ 69 a year can use the Free File products on the IRS website, which allow them to file for free.
Think about filing taxes earlier
The IRS opened the 2020 tax filing season for individual applicants on January 27th.
If you have all the necessary documents, there is no reason to wait. Early filing can help protect your tax information from theft as well as speed up your return. If your social security number is stolen and used to file a fraudulent return, your tax refund may be delayed for six months or more.
Take precautions to protect personal information.
Sign up for Federal Trade Commission fraud alerts to know all the tricks that fraudsters currently use.
Identity thieves can pretend to be your employer, payroll company, or even the IRS itself, often making requests that seem unnecessarily urgent, threaten fines, and force you to provide confidential information or download an attachment containing malicious software. You should never provide personal information over the phone to someone who says they are from the IRS. The IRS will never contact you by phone, email, or social media.
Apply for an extension of the deadline for submitting a declaration if you think you need it
If you don't think you can get everything in order on time, apply for an extension. Despite the fact that April 15, 2020 is Tax Day, when you have to pay taxes to avoid penalties, the renewal will give you six more months to prepare to apply.
Decide what you will do with your tax refund.
Evaluate what your tax refund may be, and then determine what types of purchases you can make after receiving it.
Think about how you made and spent money over the past year.
Tax season is the perfect time to think about your annual income and how you spent it. You can count all the numbers and also determine if you can improve your income next year, change your budget, etc. This will help build financial goals for 2020.
Make a checklist for next year
While you are filling out the declaration for 2019, make a checklist of all the information you need so that you can quickly collect it next year. Spend a few minutes regularly collecting documents throughout the year so you don’t have to dig into a pile of papers or emails next year when you sit down to prepare a declaration.
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