When it is time to prepare your tax statement, getting organized and knowing the proper steps to take before you start can save you hours of time and effort. Whether preparing your taxes on your own or using a paid professional, here are some tips to make the process as painless as possible.
1. First, you want to make sure you have all necessary tax identification numbers for yourself, your spouse, and any dependents you will be claiming. If you don’t have a Social Security Number and are unable to obtain one, you need to obtain an Individual Tax Identification Number from the IRS. If you don’t provide these numbers, there may be delays processing the return, potentially causing late filing fees or a delay of expected refunds.
2. Next, obtain your statements that prove your income, including but not limited to W-2s, 1099 forms, retirement income statements, as well as interest deduction forms for your student loans or home mortgages. Some of these may be available online through your mortgage or student loan manager. These will all be sent to the IRS by your employers, bank, and other companies that report, so you’ll want to make sure you have the correct items so everything will match.
3. Even though you won’t be sent a statement in most cases, find receipts for deductions. If you donated to charities or other non-profit organizations, save your receipts, as these can sometimes be claimed as well. You can also claim medical expenses if they are more than a certain percentage of your income, so find out how much you’ve paid for doctor visits.
4. If you purchased health insurance through the Health Insurance Marketplace and used tax credits to help pay for it, make sure you receive a statement from the Marketplace. You will need this to claim any applicable refunds if you had less income than anticipated or determine tax owed if you had more income. You may receive it in the e-mail, so check there first if you want to save some time.
5. “Organize all of the documentation and received forms so you know where to find them, so when you start filling out the forms there is no time wasted looking for loose documents,” said Fulton CPAs. This also allows you to know if anything is missing.
6. After that, obtain the proper tax forms. They are available on the Internal Revenue Service’s web site, or you can get them from the post office. If you are claiming a standard deduction and only have a W-2 as your income, you can file the 1040-EZ form, which is the most basic statement available. If you are itemizing your interest from mortgage, student loan, or medical bills, you will want to use the 1040-A or 1040 forms.
The IRS typically starts accepting returns around the middle of January, so now is a good time to get started filling them out. The paper forms all have instruction books you can reference if you need assistance, and the IRS website also has information and answers to commonly asked questions. If using online software, you can often obtain help through a search function or database.
7. Before filing, check for errors. When you’re done filling out the form, it’s a good idea to go back and make sure all of the lines that apply to you have been filled in. Don’t forget to sign your form, as it will be returned to you and delay any refunds you may be receiving if you don’t. You’ll also need to attach a copy of all W-2 forms, 1099 forms, and other documents required to be sent. Keep in mind that if you’re filing with a paper form, refunds can sometimes take an extra few weeks.
If you will be electronically filing your taxes, make sure you have last year’s tax forms available. The IRS requires your adjusted gross income from 2015 in order to e-file taxes for 2016. If you don’t have that available, you can file by paper, or use last year’s PIN that you self-selected. Electronically filing taxes tends to make returns arrive within a few weeks, but it is not recommended that you start spending the money in advance, in case of a delay.
8. If you are claiming an Earned Income Tax Credit, keep in mind that the IRS cannot process your refund until February 15th at the earliest. However, it is still recommended that you file before that date, as the sooner you file the sooner you can receive your refund. The IRS web site has a tool that allows you to check the date of your anticipated refunds, so you can know your return was received.