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Tax season is upon us, and whether you’re filing your taxes for the first time or you’re a seasoned filer, it’s easy to overlook details that could save you money or prevent costly mistakes. To help you stay on track and make the process as smooth as possible, we’ve put together some helpful tax tips to keep in mind as you prepare to file.
1. Start Early
It’s tempting to put off your taxes until the last minute, but starting early can alleviate stress and give you plenty of time to gather necessary documents. The sooner you begin, the more time you’ll have to correct any errors or missing information. Plus, filing early might mean a faster refund if you’re expecting one!
2. Organize Your Documents
Keeping your tax documents organized is one of the most important steps to ensure a smooth filing process. Make sure you have all the necessary paperwork, including:
- W-2s from employers
- 1099 forms for freelance or side hustle income
- Receipts for deductible expenses (business-related, charitable contributions, etc.)
- Mortgage interest statements (Form 1098)
- Student loan interest forms
- Health insurance forms (Form 1095)
Staying organized will help you avoid scrambling to find documents at the last minute and reduce the chances of missing any deductions or credits.
3. Don’t Overlook Deductions and Credits
Many people miss out on valuable tax deductions and credits, which can lower their tax bill or increase their refund. Some commonly overlooked deductions and credits include:
- Standard Deduction vs. Itemized Deductions: Depending on your situation, the standard deduction may be higher than itemizing your deductions, or vice versa. Know which option benefits you more.
- Charitable Contributions: If you donated to charity, make sure you have the receipts or acknowledgment letters. Donations to qualified organizations can often be deducted.
- Child Tax Credit: If you have children, be sure to claim the child tax credit, which can provide significant savings.
- Earned Income Tax Credit (EITC): If you meet certain income qualifications, you may be eligible for the EITC, a valuable credit for low to moderate-income families.
Make sure to review all the available credits and deductions before filing, as they can have a big impact on your final return.
4. Keep Track of Your Stimulus Payments and Tax Relief
If you received stimulus payments or other forms of tax relief, make sure you report these accurately when filing. The IRS will send you Form 1444 (for stimulus payments), and it’s important to know how much you received to avoid over- or under-reporting.
Also, keep in mind any special tax breaks or deadlines that might apply to you, especially if the pandemic affected your income or situation in any way.
5. Use Tax Software or Consider Hiring a Professional
While many people can successfully file their taxes on their own using tax software, others may prefer the guidance of a tax professional. Tax software is generally user-friendly and can help ensure you don’t miss any deductions or credits. However, if your tax situation is complex—such as having multiple sources of income, owning a business, or dealing with investment income—it might be worth consulting a tax professional.
Hiring a CPA or tax advisor can help you navigate complex tax laws, avoid costly mistakes, and maximize your return.
6. Double-Check Your Information
Before you hit “submit” on your tax return, take a moment to carefully review all the information. Make sure that:
- Your Social Security number (SSN) and your dependents’ SSNs are accurate.
- All income is reported, including freelance or self-employed work.
- Your bank account information is correct if you’re expecting a direct deposit.
- Any credits and deductions are properly claimed.
Errors, even small ones, can delay your return or cause issues with the IRS.
7. Know Your Filing Deadline
The filing deadline for most people is April 15th (or the next business day if it falls on a weekend or holiday). However, if you need more time, you can request an extension. Just keep in mind that an extension gives you more time to file your taxes, but it does not extend the deadline for paying any taxes owed. So, if you owe, you’ll still need to estimate and pay those taxes by the original deadline to avoid penalties.
8. Don’t Forget State Taxes
In addition to federal taxes, you may also need to file state taxes, depending on where you live. Each state has different rules and deadlines, so be sure to check with your state’s tax agency for any specific requirements. Many states have online filing options to make the process easier.
9. Save for Next Year
As you file your taxes this year, start thinking about next year. If you received a large refund or owed a significant amount, you might want to adjust your withholding for the following year. A tax professional or tax software can help you make these adjustments to avoid surprises in the future.
Additionally, now’s a good time to think about setting up a tax-advantaged savings account, such as an IRA or 401(k), to lower your taxable income for the upcoming year.
10. Stay Informed About Tax Law Changes
Tax laws can change frequently, and it’s important to stay informed about any updates that could affect your filing. Be sure to read any communications from the IRS or consult a tax professional about any new credits, deductions, or requirements that may apply to you in the future.
Final Thoughts
Tax season doesn’t have to be stressful if you stay organized and prepared. By following these helpful tips, you’ll be able to file your taxes confidently, minimize your tax liability, and potentially increase your refund. Remember to start early, double-check your information, and take full advantage of the deductions and credits available to you. Happy filing!
