Filing your federal tax return can be daunting, but you can avoid rookie mistakes while saving money by taking it step-by-step during tax season. The options listed below can help you fill out your tax returns.
Recognize Your Income
You must file a tax return if you earn more than a certain amount during the year. If you’re employed, look for “cumulative” earnings on your pay stub, and if you have multiple jobs, add up your payments for each job. Also include income from another origin, such as money earned on rental properties, items sold, investments, or interest.
Keep the Record of Documentation Up to Date Throughout the Year
Please keep track of tax-related documents throughout the year; it will make your tax season much smoother. You should retain receipts for charitable donations, medical and work-related expenses, and all other items from Step 4. You may maintain receipts for student loans or investments and grants or scholarships. Having them on hand and in the correct order can help determine if you need to go into detail and simplify the process. After filing your taxes, you should also save on paperwork. The IRS recommends keeping records for at least three years.
Identify the Credits and Deductions that You Can Take Advantage of
If you know what credits and deductions you’re entitled to, you may be able to gather the necessary documentation. Here are some questions to consider:
- Have a savings loan. You may be eligible for a tax credit if you pay into a retirement plan without enrolling full-time and are not listed as a dependent. The credit limit is based on your enrollment status and adjusted gross income.
- Interest in student loans. You can deduct up to $2,500 in interest based on your revised adjusted gross income.
- Deductions for charitable donations. Do you give to charity or your alma mater? You can usually deduct qualifying philanthropic donations when reporting your taxes.
- Fees for freelancers. If you are freelance, you may be entitled to deductions for work-related expenses, such as industry-specific memberships or office supplies.
Keep an Eye on Your Deadlines
If you expect a refund, you will receive it as soon as possible. If you received your tax return in January or February, you have two months to prepare your return before the April 15 deadline. Plan when you will start coming back and finish as soon as possible so you can schedule another meeting or two if you need to look for other documents or ask for help. Experts often suggest that filing taxes earlier is preferable to filing taxes later. The earlier you file your tax returns, the more likely you will avoid tax-related identity theft, which is on the rise.
Determine How You Can File Your Tax Return
You have many options for preparing and completing your tax return. Learn about each option so you can choose the one that best suits your needs:
Suppose your adjusted gross income (a tax rate that means your income minus certain tax deductions) is below a certain threshold. In that case, the IRS offers free tax preparation software to help you prepare your tax return and determine eligible deductions or credits. You can file your tax return for free.
You can complete IRS forms online. If your adjusted income is higher, the IRS has electronic versions of paper forms that will calculate you. However, they only provide essential assistance and will not help you determine what deductions or credits you may be entitled to.
Tax preparation software. If you need more help, you can pay to use these online tools available from various sources. They show you how to complete your tax return and help you determine if you qualify for a deduction or credit.
Tax preparer. Make sure you work with people you can trust. If you need help from an expert, you can contact a tax preparer or accountant. You give this person access to much personal information, so choose your accountant wisely. The IRS maintains a list of certified tax advisors who can help you find one in your area. While this does not guarantee accuracy, it is a good starting point.
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