Taxes are an unpleasant fact of life for most people, but some planning ahead may be a little easier. Tax professionals and other financial experts have compiled a list of things to do right now to manage without a problem to file a return by April 15. This writes GoBankingRates.
Examine your Declaration for the previous year
Expert Giselle Goes recommends that you find the time to review your tax information for the previous year.
Your tax return for the previous year will give you some idea of what information you need to collect now. Pay special attention to your sources of income, deductions and expenses that are likely to be similar this year.
Summarize what has changed since filing last year’s Declaration
Answer the following questions: have You changed jobs? Married? You have a child? You have changed your Bank or investment company? Refinanced mortgage?
Review your list of expenses and deductions and see what has changed over the past year to remove the extra information or add a new one.
Make sure the validity of your ITIN has not expired
If you submit a Declaration, using the tax identification number (ITIN), make sure that the validity period has not expired. Update ITIN by using form W-7, but this process may take some time, so it is better to check the validity of in advance to ITIN the past in the end did not delay the filing.
If you are a business owner, prepare documents that will need to your employees
A business owner with employees and freelancers, it is important to prepare and send all required information from employer tax records that need employees to fill in their declarations.
Determine which tax deductions and credits for business you can claim
Some tax exemptions that you can claim include health insurance for small employers. The expenses you can deduct include a home office, travel and expenses for vehicles used for business. Make sure that you have records that confirm your right to these deductions, and that you also understand the rules and IRS requirements concerning reporting on these items.
If you are a freelancer, make sure your employer has your accurate contact information
All taxpayers, working as a freelancer, worth the extra time to check whether their employers of their relevant contact information, including mailing address, so that the freelancer could get a form 1099.
If in 2019 you turned 70 and a half years, don’t forget about the RMD
If in 2019 you turned 70 and a half years, you must receive the RMD (Required Minimum Distributions) across all your pension plans, including IRA, 401 (k), SEP and other. The first payment must be received 1 April 2020.
This does not apply to those who turned 70 ½ years after January 1, 2020.
RMD is the amount that the us tax law requires to be annually drawn from traditional retirement investments and sponsoriem employers retirement plans.
Make a list of all your sources of income
Your sources of income may include self-employment, unemployment benefits, pension payments or a typical W-2 form from the employer.
There are many areas that you need to consider, and now is the time to make a list of all sources of income. You need to consider rental income, savings, investments or dividends, as well as other sources: income from gambling, income from a hobby/sideline activities, trusts, prizes, and even alimony.
Freelancers should also take into account income that is not reflected in the forms 1099
Taxpayers should remember that the declarations must take into account any taxable income, including the one which does not generate a 1099. For example, if you earned less than $600 for a freelance job, the company you worked for, do not want to send you a form 1099. Instead, taxpayers must report this income on their own.
Gather and organize all necessary documents
The best way to get a good idea of your taxes is to organize your documents. All tax documents is critical to filing accurate returns. The lack of tax documents may result in the loss of tax benefits that you are entitled to claim.
The documents that you will need will depend on your specific situation — do you have dependents, whether you are employed or not, etc.
Experts advise to create your own personalized checklist of tax documents so that nothing is missed. It is better to collect all documents in one place.
If you receive tax forms electronically, create an electronic folder where you can store any emails or other electronic information that you may need.
You can begin the process by collecting non-financial data that you will need: social security numbers and dates of birth of all who is specified in the Declaration.
Collect receipts for everything you plan to deduct
Before the preparation of the Declaration is to ensure that you have collected the documents confirming all your expenses and receipts to ensure that you take into account all possible deductions. All these little things quickly add up and help reduce taxable income.
Don’t forget about charitable contributions and medical expenses
Keep receipts for tax deductible charitable donations and medical expenses — these costs can help you get a larger tax refund.
Note the new extenders
Some of the extenders is the deduction for tuition up to $4,000, the relief of mortgage debt up to $2 million, an increase of the lower threshold of medical expenses up to 7.5%, energy-efficient loans and tax breaks for victims of natural disasters.
Contribute to retirement accounts to reduce taxable income
There is still time to make contributions to some retirement accounts, and they can still be included in the Declaration for 2019.
You can Deposit funds in a traditional IRA until the deadline for filing tax returns is April 15, 2020, to reduce their taxable income for the tax year 2019.
Make your contribution to other bills that can reduce your taxable income
In addition to a traditional IRA and you still have time to contribute to other tax advantageous account such as health savings account and a single 401 (k). They can be recharged up to April 15, 2020, and made money deducted from taxable income in 2019.
Invest in accounting software
John Bradshaw, President Appointment, argues that the availability of accounting software helps to ease the task of preparing tax returns.
“Make sure that the software is linked to your Bank account and business credit cards so you can quickly download all the financial data and to speed up the process,” he said.
Or hire a tax preparer
If you prefer to have a professional prepared your Declaration, now is the time to hire someone who will be your tax consultant and preparer.
After reviewing the consultant with your finances you should make a strategy deductions and proper filing of documents.
Carefully check all tax forms
If you start to prepare for filing the Declaration in advance, you will have extra time to double check that everything is done correctly.
Don’t just rely on an online program, or even to your accountant. Take your time, check all your information and carefully read each line. Submitting a wrong Declaration can lead to overpayment of taxes, no deduction or penalty.
Check if you’re able to apply electronically for free
Taxpayers who earned up to $69 000 a year, can use the products Free File on the IRS website that allows you to submit a Declaration for free.
Think about filing taxes early
The IRS opened the season of filing tax returns the year 2020 for individual applicants on January 27.
If you have all the necessary documents, there is no reason to wait. Early filing can help to protect your tax information from theft, and to accelerate the refund. If your social security number stolen and used for filing fraudulent returns, the tax refund may be delayed for six months or more.
Take precautions to protect personal information
Subscribe to the notification about the fraud from the Federal trade Commission to know about all the tricks that are currently being used by fraudsters.
Identity thieves can impersonate your employer company to pay wages or even the IRS, often making requests that seem too urgent, threatened with fines and by forcing you to provide sensitive information or download an attachment that contains malicious software. You should never provide personal information over the phone to someone who says they are from IRS. The IRS will never contact you by phone, email or social networks.
Apply for extension of filing if you think you need it
If you don’t think will be able in time to put in order, apply for an extension. Despite the fact that on 15 April 2020 — Tax Day when you need to pay taxes to avoid penalties, the extension will give you six more months to prepare for submission.
Decide what you will do with the tax refund
Rate, what would be your tax refund, and then determine what types of purchases you can make after receiving it.
Think of how you earned and spent money over the past year
Tax season is the perfect time to think about your income for the year and how you spent it. You can count all the numbers and determine whether you will be able to improve your income in the next year, adjust your budget, etc. This will help to build financial targets for the year 2020.
Develop a checklist for next year
While you fill out the Declaration for 2019, make a checklist of all the information you need so you can quickly assemble it in the next year. Spend a few minutes on a regular collection of documents in the course of the year, so you don’t have to dig in a pile of papers or emails next year, when you sit behind the drafting of the Declaration.