If you’re like most people, you don’t enjoy filing your income tax returns. There’s too much paperwork involved. You might need to hunt for receipts and doctor’s bills. And when you’re all done? You might owe the federal government money.
Tax Day is never going to be fun. But you can ease some of the pain of April 15 by preparing for it early.
How early? You can’t file your taxes until your employers – or your clients, if you are a freelancer – send your W-2 or 1099 forms, which they must mail to you by Jan. 31. But once those forms arrive? You’re free to send the IRS your tax returns.
Even if you’re not ready to send in your taxes that early, here are some tips from tax professionals on how to get a head start for tax season long before April rolls around.
Give Some Thought to Your Filing Status
Josh Zimmelman, owner of Westwood Tax & Consulting in Rockville Centre, New York, said that your first step should be to confirm the filing status you’ll choose when filling out your tax returns. You have several choices: single, married filing jointly, married filing separately, head of household or qualifying widow or widower with a dependent child.
Your biggest choice comes if you are married.
“If you are married, you’ll need to decide what makes more sense for you and your spouse, filing jointly or separately,” Zimmelman said.
For most couples, it makes more sense to file jointly. You’ll get a large standard deduction – $24,000 in 2018 – and you’ll only have to fill out one tax return.
Turbo Tax, though, says that it might make sense for married couples to file separately if one person has a significant amount of out-of-pocket medical expenses to claim. That’s because the IRS only allows filers to deduct the amount of these medical costs that exceed 7.5% of your adjusted gross income. Because of this, it can be difficult to claim these medical expenses if both you and your spouse have a high adjusted gross income.
You might also have to determine if you can file your taxes under the head of household category. To file under this category, though, you must meet certain requirements. First, you must pay for more than half of your household’s expenses throughout the year. Second, you must be unmarried for the tax year in which you are filing. Finally, you must have a qualifying child or dependent that you are supporting.
Filing as a head of household comes with financial advantages. You’ll have a lower tax rate and higher standard deduction – $18,000 in 2018 – than if you file as single.
Contact Your Accountant or Tax Professional Early
Do you rely on a tax professional or accountant to prepare your income tax returns? Zimmelman recommends that you contact this professional early in 2019.
“The tax deadline is in April, but you should never wait until April to call your accountants,” Zimmelman said. “You have to remember that you’re not their only client, so the earlier you give them your financial documents, the better. If you wait too long, they may be booked up for the season.”
The more complicated your tax return is – say you are self-employed, you bought a new house or you’ve had a child or gotten married – the more important it is to reach out to your tax preparer earlier. Our advice? Call your preparer early in 2019, no later than mid-February, so that this professional can start tackling your tax questions and studying your financial documents.
Get Those Documents Ready
The biggest hassle of filing taxes, especially if you itemize? Finding all the documents you need. It’s wise, then, to start compiling these documents as soon as you can.
David Bakke, a tax expert for financial website, Money Crashers, says you’ll need to find your W-2 statements from all your employers during the previous year, records of your IRA contributions, receipts for deductible expenses if you are itemizing and receipts for charitable donations and medical expenses, again if you’re itemizing.
Gathering documents can be more complicated if you work as a freelance contractor or you’re self-employed. If you’re a freelancer, you’ll need to find all those 1098-MISC forms you received throughout the year from your clients. Depending on how many people you’ve worked for during the year, you might need to track down a lot of these documents, so starting early is a smart move.
You might need additional documents, too, if you made changes in your life during the past year, Bakke said.
Say you bought a house. You’ll need to find the Form 1098 that your mortgage company sent you. This form lists the amount of mortgage interest you paid during the year. You can deduct this amount on your taxes. Your lender is required to send this form to you in January.
You don’t want to wait until April 14 to start digging through dresser drawers or closets for this paperwork, so why not make collecting your documents a priority as the new year begins?
Make a List of Incoming Tax Forms – and Check It More Than Twice
Beth Logan, an enrolled agent with Kozlog Tax Advisers in Chelmsford, Massachusetts, recommends that taxpayers write a list of organizations that are likely to send them a tax form.
This list might include employers who are you sending you W-2 forms showing how much you earned during the year, banks sending 1099-INT forms listing the amount of interest you made from your accounts and investment houses sending 1099-DIV and 1099-B forms charting your dividend and stock sales.
Then, when these forms show up – starting in January – you can cross them off your list. This way, you’ll be prepared when it’s time to refer to these documents when you’re filing your income taxes, Logan said.
Earn Some Tax Savings
Mike Savage, small business expert and chief executive officer of New York City-based 1-800Accountant, said that the end of the year is a good time to take steps to cut your taxable income.
He recommends that before the year ends, you make additional contributions to your retirement plan, whether to your employer-offered 401(k) plan or your own IRA. Doing this will reduce the amount of income you’ll be taxed on.
Savage also recommends that you make charitable contributions before the year ends. Again, this is a good way to save money. You can deduct your donations when you file your taxes on April 15.
“Spend a few hours to clean out your garage, closet, spare bedroom or storage unit,” Savage said. “Then donate some of these unnecessary items to qualified charitable organizations this holiday season and write the donations off on your taxes.”
Just remember to keep receipts of your donations so that you can prove your contributions if the IRS asks.
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