Gone are the days of using sharpened pencils and old college calculators for preparing taxes. Still, whether you utilize an online tax preparation program or a live tax preparer, there’s plenty to do to get ready for filing your taxes. The more organized you are, the more quickly and accurately you can file your taxes. It also helps you avoid errors that lead to processing delays that can slow your refund.
Gather your personal information
Your best source for your personal information is last year’s tax returns. They have Social Security numbers for you, your spouse, and your dependents. Note any changes that need to be applied to this year’s returns, such as additional dependents or an address change. They’re also good as a starting point for identifying all your deductions and credits.
Gather your income documents
Gather records and receipts for deductions
Generally, you can only claim deductions if they can be documented. This can be the most time-consuming part of tax preparation, but it can be worth it if it means lowering your tax bill. Unless you think your total deductions will exceed the standard deduction ($12,550 for individuals or $25,100 for joint filers in 2021), you don’t have to worry about itemizing your deductions on Schedule A. If your total deductions were close to the standard deduction last year, it may be worth running through them this year to see if any additional deductions could bring you over the top.
One place to look for additional deductions is with sales taxes. While you don’t need to keep sales receipts for claiming the standard sales tax deduction (based on IRS formulas), any sales taxes paid on large items, such as a car, home renovation and appliances can be claimed on top of that.
A note regarding charitable deductions: The charitable deduction limit increase allowed under the CARES Act has been extended to 2021 deductions. That means you can claim charitable giving deductions up to 100% of your Adjusted Gross Income (AGI) on cash donations. As always, your charitable contributions must be documented to claim them.
In addition, the above-the-line deduction for charitable deductions has also been extended to 2021. So if you don’t itemize, you can still claim up to $300 ($600 for joint filers) of charitable donations on your 1040 form.
Other above-the-line deductions that can be claimed even if you don’t itemize include:
Estimated tax payments
If you make federal estimated tax payments, have your record of payments handy.
The tax preparation checklist may apply to most taxpayers, but every situation is different. If you are a business owner, you will need to follow most of the same steps in preparing to file your Schedule C. By taking the time and making the effort to thoroughly prepare for filing, you’ll cut down on the time involved in completing your taxes online. If you file your taxes with a tax preparer, you’re likely to save on fees.
Bonus filing tip: Whether you file taxes online or through a tax preparer, do not wait until the last minute to complete your tax preparation. The costs in terms of potential errors or filing fees can be higher.
Please consult your tax advisor or the IRS with any questions.
| FIND A SURCHARGE-FREE ATM! | |
|
|
|
|
|