If you prepare for tax season early, it will make things easier when it comes time to actually file taxes.
You will want to choose the right tax preparer, make the most of your tax consultation, gather all of the documentation that you need to have available, determine if you need to file a tax extension, and file and pay your tax return!
Of course, it is recommended that you work with a qualified tax expert to help you with every step along the way. If you are nervous about tax season, this list should put your mind at ease, as it will give you the key ingredients for filing and paying your annual tax return.
How to Prepare for Tax Season During the Year
1. Choose the right tax preparer.
Hire the right tax expert to help you file your taxes. Tax professionals have the accounting know-how to get you the best tax benefits when they file your tax return or help you file your own.
Many tax consultants are versatile and can offer other products and services that may help you with your personal finances or other aspects of your taxes.
For example, at Borshoff Consulting, there are many business services offered: business consulting, along with payroll, CFO, non-profit organization, cash flow management, and bookkeeping services.
It’s imperative that you find someone who is experienced in tax filing and is comfortable working with your particulate tax situation. Find a tax professional with the experience, education, training, and expertise that you need.
2. Make the most of your tax consultation.
Usually, a tax preparer will give you a list of the tax documents they need in order to best help you. It’s a smart idea to bring all of those documents, along with personal identification documents, receipts, and anything else you believe will help them do their job.
Since tax consultants generally only give you one free consultation, it’s a good idea to make the most of the tax consultation! Bring along the required documentation and any correspondence you have received from the IRS (Internal Revenue Service).
It’s also smart to have a list of questions or concerns for your tax preparer. That way, you will have your mind put to rest by having them answer all of the questions that they are able to.
If you work with the right tax consultant (the one with the qualifications you need), they should be able to file your state tax and federal tax return or even represent you in the event of an IRS tax audit. Work with a tax professional that is well-suited for you.
3. Gather all the documentation you need to have available.
As mentioned, you’ll want to have all your documentation together when you file your tax return. Below are a few examples of the documents you’ll want to put together for your taxes.
For a more complete listing of the documentation (with descriptions) that you need to have ready when filing your tax return, be sure to check out this document list from Money Under 30.
Information that you will want to gather include the following:
- Charitable Contributions and Donation Receipts
- Bank Statements
- Childcare Records
- Crypto-Currency Transactions
- Education Expenses
- Gambling Records
- Health Savings Account (HSA) Information
- Investment Expenses
- Jury Duty Records
- Lottery Payouts
- Medical Bills and Receipts
- Home Office Information and Receipts
- Self-Employment Records
- Social Security Payment Account Information
- W-2 Forms
- Information About Trusts
- Previous Tax Years’ Returns
Some of the tax forms you may need in order to file include:
- 1098-E Student Loan Interest
- 1099-G Unemployed State Tax Refund
- 1099-K Third-Party Transactions (PayPal, for example)
- IRS Form 1040
4. Determine if you need a tax extension.
Typically, tax returns are due on April 15, meaning your 2021 tax return will be due on April 15, 2022. While your payment due date will not change, you can request an extension for the filing of your tax return.
How can you pay your tax bill if you have not filed your tax return? You can make estimated tax payments during the year to cover what you believe you will owe. It’s always better in these cases to overestimate than it is to underestimate.
Work with a tax professional to estimate and pay your tax bill on time, but ask for a tax extension if you cannot get your tax return filed on the due date.
5. Determine how you will file.
When you first file your tax return, things can seem a bit overwhelming. However, once you make a few key decisions (with the help of a tax professional), things will become clearer.
One determination that will need to be established is your filing status. There are 5 options for filing status:
- Married Filing Jointly (MFJ)
- Married Filing Separately (MFS)
- Qualifying Widow with Dependents (QW)
- Head of Household (HOH)
Your tax consultant can help you determine which filing status will give you the greatest tax advantage, but you are usually only able to take one of them.
In other words, you probably won’t have a choice on the filing status you need to take, but if you do, it’s a good idea to understand them well.
Another great question is, should you itemize your tax deductions or take the standard deduction? It’s important to choose the option that brings you the greatest rewards but is also something you can verify with the right documentation.
If itemizing is best but you don’t have the backup documentation to support your tax deductions, take the standard deduction.
If you kept meticulous records throughout the year and want to itemize your tax deductions but it proves to be not as financially sound to do as would be taking the standard deduction, go with the standard deduction anyway.
As you file your tax return, you will come across decisions like this that are a bit tricky if you do not understand them. That’s where a tax consultant can help!
While filing your taxes can be a bit scary, there are ways to make it easier. Prepare for tax season throughout the year by following the action steps in this article, and it won’t seem like a daunting task to accomplish!
At Borshoff Consulting, we are excited to show you how to prepare for tax season during the year. If you have any questions or would like a free tax consultation with our tax expert, Sherry Borshoff, don’t hesitate to reach out. We are happy to help you!