Preparation Is the Key to Filing Your Taxes
Believe it or not, tax season is approaching yet again. No matter how many times you’ve filed your taxes before, the thought of sitting down to file them can be intimidating. You have to make sure you have a variety of forms from a variety of places. You have to track down documentation of any expenses or donations you may be able to use as deductions. You have to contact someone to do your taxes or even find an e-filing software that’s trustworthy and easy to use.
It can all seem very overwhelming on the surface, but take a deep breath and relax. Filing your taxes doesn’t have to be a stressful aspect of your life. The immediate key to dialing down the stress levels is being prepared.
If you’re not prepared to do your taxes when you sit down to do them and you don’t have all the necessary materials at hand, you’ll become overwhelmed quickly. If you’re thoroughly prepared to do your taxes before you sit down to do them and have all the necessary materials at hand, the journey will be much smoother.
Being prepared means you’ve won half the battle.
Before you dive into doing your taxes, educate yourself on the things you need to know and the materials you will need to complete the process to the best of your abilities.
Gather the Necessary Materials
Let’s face it, you can’t do your taxes without having specific and necessary documents. Depending on your lifestyle, you either need many documents or just a few on hand. As a general rule of thumb, these are the following types of paperwork you’ll need to successfully file your taxes.
- Personal Identification – You’ll need to know your social security number to file your taxes, so have your social security card on hand. If you have a spouse, children or any other dependents, you’ll need their social security numbers as well.
- Earned Income Reports – You’ll need documentation of all your earned income from the previous calendar year. These documents include W-2 forms from your employer and/or 1099 forms from contract work.
- Employment-Related Expense Reports – If you have expense reports from anything related to your job, have those on hand. These reports can include fuel and mileage for your car, parking expenses, meals, professional membership group fees, non-reimbursed moving expenses, home office expenses, etc. You could even include job hunting expenses in some cases.
- Documentation of Retirement Accounts – If you have accounts such as a 401K, Roth IRA or other retirement account, make sure you have those on hand. If you’re currently taking distributions from these types of accounts, or from social security income, you’ll most definitely need these documents on hand as well.
- Health Insurance Proof – If you have health insurance, your provider should physically mail you documentation of the fact you had health insurance throughout the calendar year. If you have questions about this document, contact your health insurance provider. If you’ve purchased health insurance through the US government’s “Marketplace,” you’ll need Form 1095. You should receive a credit back for your purchase if you have this form.
- Major Life Event Paperwork – Have you been married or gotten divorced in the past calendar year? Have you welcomed a child into the world or adopted a child? Make sure you have all those certificates and documentation on hand as well.
- Childcare Expense Reports – Do you have children in daycare? Do they have a babysitter? Make sure you gather any childcare expense reports you may have. Eligible daycare providers and caregivers could result in you qualifying for credits.
- Education Expense Reports – If you’re currently paying tuition for college or have student loans, be sure to have all your education expense reports on hand. You’ll need documentation for your tuition and fees as well as for the interest paid on your student loans. You’ll need Forms 1098-T and 1098-E.
- Property Tax and Mortgage Interest Reports – If you own property and have a mortgage where your payments include monies escrowed for property taxes, your mortgage lender will send you Form 1098. This form will also tell you the amount of home loan interest you can claim on your taxes.
- Charitable Donation Documentation – If you’ve made charitable donations during the past calendar year, break out the documentation for them so you can receive credits. Qualifying donations include cash and non-cash to churches, schools and animal shelters. Driving mileage for charitable causes could also be included in this.
- Your Online Banking Account Information – If you choose to receive your tax refund electronically (via direct deposit), you’ll want to have your bank account number and routing number on hand. If you don’t want your refund electronically, then you most likely don’t need to have this information on hand.
Various Notes and Pieces of Advice
You most likely received stimulus money from the government during the COVID-19 pandemic. You may be worried about getting taxed on this stimulus money, but have no fear. You will NOT have to pay taxes on the stimulus money received from the government.
It’s very important to file your taxes on time, but it’s even better to file them early. By filing your taxes early, you’ll receive your tax refund faster. As a bonus, by filing early, you’re helping yourself prevent identity theft. It may seem like a weird correlation, but the IRS allows each social security number to file one tax return per year. If you jump on filing your taxes as early as you can, you’re ensuring your tax return will be the only one filed for your social security number.
It’s also very important to find a tax accountant you trust to prepare and file your taxes. Be sure you do as much research as possible on tax accountants in your area before choosing one. Don’t be afraid to ask friends and family members if they have an accountant they recommend as well.
If you would prefer to use a tax e-filing software so you can prepare and file your taxes yourself from home, then more power to you. Just make sure you also do just as much research when it comes to choosing the right program as there are many competing software out there. To jump start your search, E-File is a great IRS e-file provider option. The software has three filing options to choose from: free federal e-file, deluxe plus e-file and premium plus e-file. You’ll be sure to find the perfect option on E-File to use for your tax filing needs.
Dates You Need to Know
If you’re unsure every year about when you can start filing your taxes and when you need to file your taxes by, it’s always a smart idea to check the IRS’ website. All the crucial dates and information you need to know can be found there.
You can begin filing your taxes for the 2020 calendar year on Friday, February 12, 2021. This is the day the IRS will begin accepting and processing tax returns.
If the accountant or e-filing program you’re using is an IRS Free File partner, you could’ve filed your taxes as early as January 15, 2021. The IRS can’t officially receive your return until the February 12 date though.
The deadline to file your 2020 taxes is April 15, 2021. Remember to file early so you can receive your tax refund as soon as possible. The average tax return from 2019 was $2,500 and most people receive their return within 21 days of the IRS accepting your tax return when you ask for your refund via direct deposit.
Filing your taxes can seem like a cumbersome and overwhelming task, but it truly can be a breeze if you’re prepared with the proper materials, you’ve done your research and you file on time.