Does the thought of tax season make you break out in a sweat? This easy, step-by-step guide will help you prepare your taxes without any worries (or tears.)
Tax season has most people dreading it because of all the paperwork involved with taxes. Preparing your taxes can be a simple process with a little organization and work on the front end.
Gather Your Tax Documents
What forms will you need?
- W-2s
- 1099s
- Mortgage interest statements
- Investment income statements
- Form 8822 (if you moved)
- SS-5 (if you changed your name)
- W-4 (to adjust tax withholdings based on your new household income)
Choose Between the Standard Deduction or Itemizing
You have two choices when you file your taxes: Take the standard deduction or itemize your deductions. Tax deductions lower your taxable income, meaning you will owe less, so this decision is important.
How do you decide? This is where you will need to take time to go through receipts and look into what you can deduct if you work at home or use your vehicle for work, etc. You will add all these deductions together. If they are more than the standard deduction, then itemizing is the way to go. If not, taking the standard deduction will make more sense.
If you do plan on itemizing your deductions, you’ll need to prove that fact. You should have a bookkeeping system that will make itemizing easy. Keep records throughout the year along with receipts. Make sure you have those receipts for everything you deduct. This includes childcare, donations, and home office expenses, to name some.
Pick a Filing Status
If you are single, filing status is easy. Married couples have choices, so the best way to make the best choice for you, try each filing status. These statuses are: Married filing separately, married filing jointly, or head of household. Then you can file whichever status gets you the most back.
File Your Taxes
You can choose to do your own tax preparation. There are several sites with free tax software or advanced software that have a nominal cost. When preparing taxes yourself, you must take care to avoid mistakes. Simple mistakes on your taxes can cost you hundreds. In some cases where you have complicated taxes, you may want to hire a professional. This can be expensive, but it can also lower your taxes dramatically more than you can do on your own and pay for itself.
You can mail in your taxes or choose to file electronically, either method is acceptable, though filing electronically gets you a refund sooner. As with every decision in life, you need to make the one that works best for you.
Prepare for Next Year
Every good tax filing guide should include this step. If you start preparing for your taxes next year, you may even look forward to doing your taxes because you handle it like an expert! Preparation and good bookkeeping are critical to an excellent strategy to handle your taxes next year. Maybe it will have YOU writing guides for others.
Hopefully, these steps will set you at ease when it comes to filing your taxes. Every working adult faces the same dilemmas at tax time. Remember that if you are organized and prepared and make good decisions, it will be easy and uneventful.
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