Free Tax Preparation Tips
When it comes to tax preparation many people are far from efficient. In fact, most taxpayers are disorganized and unprepared when they begin to file their returns. Of course, you don’t have to make this mistake. The following 5 tax preparation tips can benefit you in a number of ways:
1. Get organized with the help of a checklist. If you use a tax preparation checklist, you’ll know for sure that you have all the right documents ready and that you won’t miss a single detail. A tax preparation checklist is the best way to stay organized because you can physically see what you have already done, as well as what needs to be completed in the future.
2. Get tax help if need be. You can find tax help in a couple of different ways. If you're looking for free tax help, the IRS offers 2 programs to eligible taxpayers: Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). There are also numerous software programs to help you prepare and file your tax return. Many people use tax preparation software because it helps them stay organized, maximize tax deductions and tax credits, and file electronically. If you are looking for one-on-one tax preparation assistance, consider hiring a CPA or tax professional.
3. Triple-check your work. Do not be tempted to send off your tax return until you review it at least three times. This will help to ensure accuracy while allowing you to feel confident in the decisions that you’ve made. Make sure that all your personal information is correct, especially Social Security numbers. Any mistakes on your tax return will lead to slower IRS processing, which means a longer wait for your tax refund.
4. Tax preparation does not start the day that you want to file your tax return. If you want to be fully prepared, you need to think about your tax situation throughout the year. Those who wait until April to organize their finances are putting themselves in a vulnerable position. Even if the next deadline is months away, you should still do what you can to stay organized NOW to avoid potential problems in the future.
5. Give yourself enough time by knowing your deadlines. This goes along with tax preparation tip #4 above. If you know the deadlines that you must adhere to, it becomes much easier to be prepared for anything that comes your way. Some people only need to be aware of one deadline: April 15th. Others will need to remember several deadlines, such as those who owe local/state taxes and make quarterly estimated tax payments.
Almost everyone should be able to take advantage of these five tax preparation tips. Overall, you must be willing to do whatever it takes to successfully prepare and file your tax return. The closer you follow these tax preparation tips, the better chance you have of avoiding costly mistakes.
TAX PREPARATION CHECKLIST
Before you prepare your tax return you should have a tax preparation checklist to help you get organized. Along with this, your tax preparation checklist should also get you in the right frame of mind. Once you are organized and ready to move forward, you will find that everything begins to fall into place.
What is the overall goal of a tax preparation checklist? Simply put, it will help you get everything together before you begin to file your tax return or show up for your appointment with a tax professional. As you move down the checklist, you will find items you may have missed as well as things that were accounted for in the past. Listed below are some of the details that should be included on your tax preparation checklist.
Tax Prep Checklist for Personal Information — The IRS needs to know who is filing the tax return, as well as how many people are covered on it. To make this easy, they require:
- Your Social Security Number (SSN)
- Your spouse’s Social Security Number (if married)
- Social Security Numbers for any dependents
Tax Prep Checklist for Income Information — The following documents will help you prepare all the income information that you need to file a federal tax return. Note that all these items may not apply to you:
- W-2 Forms from all employers you (and your spouse, if filing a joint return) worked for during the past tax year
- 1099 Forms if you (or your spouse) completed contract work and earned more than $600
- Investment income information (including: interest income, dividend income, proceeds from the sale of bonds or stocks, and income from foreign investments)
- Income from local and state tax refunds from the prior year
- Business income (accounting records for any business that you own)
- Unemployment income
- Rental property income
- Social Security benefits
- Miscellaneous income (including: jury duty, lottery and gambling winnings, Form 1099-MISC for prizes and awards, and Form 1099-MSA for distributions from medical savings accounts)
Tax Prep Checklist for Income Adjustments — The following adjustments can help reduce how much you owe in taxes, and in turn, increase your chance of receiving a tax refund.
- Homebuyer tax credit
- Green energy tax credits
- IRA contributions
- Mortgage interest tax deduction
- Student loan interest deduction
- Medical Savings Account (MSA) contributions
- Self-employed health insurance
- Job-related moving expenses
Tax Prep Checklist for Credits and Deductions — There are many tax credits and tax deductions for various expenses, which are designed to help lower the amount of tax that an individual has to pay. Note that many of these items may not apply to you (yet).
- Education costs
- Childcare costs
- Adoption costs
- Charitable contributions/donations
- Casualty and theft losses
- Qualified business expenses
- Medical expenses
- Home office expenses
Tax Prep Checklist for Direct Deposit — Are you interested in having your tax refund directly deposited into your bank account? Choosing this option means you will get your refund faster. In order to set up Direct Deposit, you will need to provide some information, including:
- Your bank account number
- The bank’s routing number
These tax preparation checklists should help you get organized before filing your next income tax return.