As you’re gathering all of your 2017 tax documents and preparing to file your taxes there are some important things to keep in mind. Following these tips will help you avoid common pitfalls and mistakes and ensure you keep as much of your own money in your pocket as possible. After all, the less money you have to give to Uncle Sam, the more you can put towards reaching your financial goals, paying off debt, or otherwise positively impacting your credit score.
Know the filing deadline
We all have April 15 burned in our brains as the last day to file taxes. But if that date falls on a weekend or a holiday the due date can be different by a couple of days. If the date is different it will always be later than April 15. For example, the filing deadline this year is April 17, 2018 because April 15 falls on a Sunday and Emancipation Day, a holiday in Washington D.C., will be observed on Monday, April 16.
Make sure you need to file
If you’re not sure whether or not you need to file, you can find out using the IRS’s online Interactive Tax Assistant. By answering some basic questions about your filing status, gross income and whether you had federal income tax withheld, you will be able to determine whether or not you need to file for a particular tax year.
Review last year’s tax returns
Reviewing the information from the previous year’s federal and state tax returns will make the current year’s filing much simpler. Much of the information will be the same, including employer federal ID numbers, children’s social security numbers, etc.
Gather all necessary income documentation
Make sure to gather all forms that include income information, specifically those from employers and financial institution. These includes:
- Form W-2 (wages)
- W-2G (gambling winnings)
- 1099-INT (interest)
- 1099-DIV (dividends)
- 1099-B (investment sales)
- Combined 1099 (brokerage combined tax statement)
- 1099-MISC (independent contractor work, royalties)
- 1099-R (retirement distributions)
- K-1 (MLP, Partnership or S-Corp share of income)
- SSA-1099 (Social Security benefits)
- 1099-G (unemployment benefits and state tax returns)
- 1099-C (forgiven debt).
- Income Adjustment Documents, including Form 1098-E (student loan interest); 5498 (IRA contributions); 5498-SA (HSA/MSA contributions); and 1098-T (tuition).
Determine whether or not you should itemize deductions
Itemizing deductions is only beneficial of those deductions will exceed the standard deduction. If you’re using a tax software program it will guide you as to what you should do. If you do opt to itemize your deductions, you will need forms including 1098 (mortgage interest) as well as receipts for expenses such as charitable contributions, unreimbursed employer business expenses, and medical expenses.
Don’t forget your state taxes
Most states require a separate state tax return to be filed. There are seven states that don’t collect state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
Check and double-check your return
Before you drop that tax return in the mail or hit submit when e-filing, make sure that you’ve checked the figures you’ve entered when filing your return. A mistake can mean a filing error that could give you an overinflated refund you’ll have to pay back later.
File on time
Even if you owe an amount you cannot pay in full by tax day, it’s important to file on time and to pay as much as you can. Doing so will allow you to avoid a late filing penalty and to minimize interest charges on any unpaid balance. If you cannot pay your taxes in full, you can request an installment agreement from the IRS.
Tax advantage of free filing
The IRS offers Free File to file your federal taxes without paying any fees. The amount of your adjusted gross income determines the version you will need to use. If it’s $66,000 or less, you can use the free filing software. If your adjusted gross income is higher, you will use Free File fillable forms that are the electronic version of its paper forms.
You can still file paper returns and many filers do so because they’re uneasy sending their personal and tax information over the Internet. However, e-filing via the IRS website is very safe and it will expedite your refund if you’re getting one.
If you would prefer to work with an accountant but don’t have one, we would be happy to recommend one to you!