It is tax season! JOY!! Said no accountant ever. But alas, here we are and now it is time for all of us to file taxes!
Filing taxes seems to create stress and anxiety for many, as the paperwork and unopened IRS forms pile up and the deadline draws nearer. However, it doesn’t need to be this way! With a little guidance, thoughtful organization and reminiscing about the year before, filing your taxes can truly be a simple process.
Here is a 3-step guide on how best to move forward with filing your taxes.
All of the income that you earn throughout the year is typically reported directly to the IRS via an IRS reporting statement that is also sent to you to report on your tax return.
W-2 – Employee Income
1099INT- Interest Income
1099DIV- Dividend Income
1099B- Sales of Investments
1099MISC- Non-Employee Income
1099G- Government Related Payments
1099R – Retirement Distributions
Additional Income Information to Gather:
Business income for sales of goods or services
Sales of Assets
Keep in mind, deductions are YOUR responsibility to gather and report. The IRS is not going to track you down because you missed a few deductions to reduce your taxable income. But they will always come back to you if they find you are missing income. If there are deductions to be had, you need to compile receipts and/or documentation to support them.
Below are some of the most common deductions to be considering:
Form 1098- Mortgage Interest
Real Estate Taxes Paid
Property Taxes Paid
Significant Medical Expenses
Student Loan Interest
Business expenses to offset business income
Rental expenses to offset rental income
Your tax return is also a direct reflection of life events that occur throughout the year. You will need to either report the below changes with a specific form or with a new filing status or amount of dependents depending on the change that took place. If any of the below life events occurred, it will be reflected on your tax return.
You got married or divorced
You changed your name
There was a death of a family member
You added a dependent to your family dynamic (a baby, an elderly relative, etc.)
Then please make note of those changes and mention them to the professional you are working with. If you are filing yourself, ensure that those changes are in fact reported and reflected on your completed tax return.
The next step will be to file your taxes. You have 3 options to choose from as follows:
There is a tremendous amount of value in having a CPA or experienced accountant file your taxes year after year. They are there to help assist you in the process of filing your taxes, establishing deductions or credits that you may be eligible for that you weren’t aware of and being a resource to you not only during tax season but all year round. They will also be your trusted liaison between the IRS and yourself, if ever needed.
Hiring a professional will typically be the most expensive option, but will also provide you with the most value in having a trusted tax advisor to address any and all of your tax concerns and questions over time.
You can go to a tax preparation service center where they are hired and trained to file your taxes. They will provide you with a one on one experience and be able answer many of your more basic tax related questions and concerns. A few examples would include;
Research your local government offerings for Tax Prep Services for community members, Veterans and/or the elderly.
An in person tax preparation service will typically be less expensive than a professional CPA firm but you also will not have the same relationship with them. Many of the individuals who work at a tax prep service firm only work during the busiest times of year and will not be available to you as a resource all year round. It will be a very quick exchange where you hope you covered everything you needed to.
But if there is very limited complexity to your return, this could be a quick, inexpensive option that will not take up a lot of your time and provide you with that in-person experience that you are seeking.
If you do not have a significant amount moving pieces and your “tax life” is more straight forward, then filing yourself using a Tax Software, that allows you to file online in the comfort of your home, is a great option as well.
Three Tax Software Options To Consider:
H&R Block Tax Software
These tax software companies are very user friendly, inexpensive and provide you with the opportunity to file your taxes at your leisure. They also provide Live or Email support to answer questions and concerns.
Naturally, the downside to doing it yourself is that you will now be spending a good amount of time navigating the software and filing the necessary forms.
For some, this is the best and most reasonable option. But for others, to save a few dollars on the tax software, you may be costing yourself a significant amount of money in lost deductions and tax credits that you weren’t aware of because you didn’t have a professional guiding you.
I understand filing taxes doesn’t make you feel jazzed – but it also doesn’t have to be stressful and overwhelming. With a little proactive organization and thoughtfulness, filing your taxes could be a breeze!
Feel free to reach out to me directly if you have any specific tax related questions around your filing and how you should proceed!
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