The IRS started formally accepting tax returns on January 23. We all know tax filing season can be stressful. But if you plan right and have some basic paperwork together, filing your taxes can be done in a way that will minimize stress and maximize the relief of knowing your taxes are off your plate for another year.
Read more: 7 worst tax scams you need to watch out for
Get your documents organized
It’s helpful to keep all necessary tax filing documents in one place – starting at the beginning of the tax year. If you haven’t done that in the past, take some time soon to get last year’s tax documents organized and put a system in place for keeping this year’s tax documents organized so that next year’s planning will be easier. Some of the documents you’ll want to have on hand include:
- W-2s from all employers
- 1099 forms if you do any contracted or self-employed work
- Receipts from any charitable contributions
- Receipts from itemized expense deductions such as work-related deductions, mortgage interest numbers or child-related deductions
The more organized you are regarding income, expenses and deductions, the simpler tax filing will be.
Decide how/when you’re going to file
How are you going to file your taxes? Will you use one of the many DIY tax filing cloud-based or software programs? Will you hire a tax specialist in your area?
One way you can decide whether you want to DIY your tax return or have a tax specialist do it is to figure in the time factor. If you know the tax laws well and are good at filing on your own, that may be the way to go. There are several different options for DIY tax filing, making filing your own taxes easier than ever.
If you have a more complicated return and are going to have to study the current tax laws for hours and put in a lot of time to self-file, it may be more time-efficient for you to hire a tax preparer.
Depending on your individual tax situation, a professional tax preparer might charge between $100 to $300 or more. Be sure to shop around and get recommendations from friends and family before choosing a tax preparer if you decide to go that route.
Also, many organizations offer free tax preparation for low-income people as well as seniors, so be sure to check within your community for those options if you’re not going the DIY route.
As far as the “when” to filing taxes, there are a couple of camps to consider. Advocates of filing early cite a lesser chance of potential fraud, where someone might be able to steal your information and file in your name, scamming your refund. Advocates of waiting closer to the end of the season to file cite a lesser chance of being audited. That being said, if you’re organized with your tax documents and honest about your deductions, a tax audit is usually nothing more than a minor inconvenience.
Beware of potential hidden tax issues
It’s smart to be aware of potential tax issues that might cause tax filing to be extra stressful. For instance, if you’ve had a lot of self-employment income and haven’t paid any taxes during the year, you might be in for a hefty tax bill come April. Or if you gave away something like a car to a charitable organization, you must have a receipt to deduct the full value of the vehicle. Be sure you are aware of potential issues that may come up as you file so you can resolve them before you complete your tax return.
Know which deductions you qualify for
There are a host of tax deductions and tax credits available for people to take advantage of depending on their income situation, their family situation and their employment situation. For a complete list of credits and deductions for the tax year, check out this IRS website. Some commonly missed tax deductions include medical expenses, child-rearing expenses and expenses for charitable deductions such as when you donate household items to a charitable organization.
Make a plan for how you’ll handle the outcome
Whether you end up getting a refund or having to pay in, it’s smart to have a plan for how you’ll handle the results of your tax filing. If you’re getting a refund, make a commitment before you receive it to spend 10% on fun stuff and use the rest on something that will help your financial future, such as paying off debt or investing for retirement. If you end up having to pay in, make a savings plan that will ensure you’ve got the cash available to pay your taxes by the due date (Tuesday, April 18 this year). Cutting unnecessary costs, working more hours and selling items you no longer use or need are ways you can help save more money to pay an upcoming tax bill.
Know what to do in the event your tax return is fraudulently filed
If you find out that someone has fraudulently filed your tax return, it’s important to contact the IRS and the credit bureau reporting agencies as soon as possible. The IRS has systems in place to resolve fraudulent filing quickly, but the sooner you report suspected tax filing fraud, the easier it will be for the IRS and credit bureaus to resolve any issues and safeguard your identity.