Are You Prepared For Tax Season?
The New Year brings in a new tax season. It’s a simple time for many but for others a much more complicated process. Depending on your lifestyle and what you’re involved with in regards to owning a business, it can get a little overwhelming. However, the majority of people who do file taxes at times forget or wait until the last minute. It doesn’t matter if you’re doing your taxes for the first time or the twentieth. We made a little refresher on what to look out for this year. There are so many things that can get overlooked or just forgotten since you filed your taxes last year. Here’s what you need to gather and a little insight into what you need to know.
Tax Season Basics
Tax season begins on January 1st and ends on April 15th. You MUST file your tax return by this date. Anything past April 15th results in penalties starting at 5%. The advice here, take care of your taxes as soon as possible to avoid any kind of mess and fees. There’s some terminology you should refresh on to understand many of the documents that you’ll face this year, such as:
Earned Income: This includes any form of salaries, wages, tips, professional fees, which also means taxable scholarships and fellowship grants given.
Unearned Income: This includes any investment income such as the interest on your savings account, dividends, capital gains, and unemployment received.
Gross Income: This simply means all income received in the form of money, goods, property, and services that are not exempt from taxation.
Exemptions: Simply put, a predetermined amount of money you’re able to deduct from your income for basic living. This means you as an individual and any dependents you may have like your children.
Standard Deduction: This is a set amount that the government will give you if you meet specific requirements. This also will differ depending on marital status.
Itemized Deductions – This includes six main categories: medical and dental, taxes, interest, charitable contributions, and casualty theft, and less. These will help reduce the amount of taxes that you owe.
W-2 Forms: These wage-income forms you receive from your employer so that you can prepare for your taxes.
Filing Status: Basically, if you’re single, married, head of household, and each one has other sub-categories.
Filing Your Taxes
If you’re a first-time filer, then the IRS has provided you with plenty of resources such as the Free File and steps to take to make tax filing easier. You also want to keep an eye out for tax forms that will come in the early months of the year. Not every form will apply to every person, but here’s what to look out for:
The most common and essential form which your employer will provide no later than January 31st.
This will have your mortgage interest that you will receive in January
Your student loan interest paid if over $600, which you will receive in January; however, it may be online.
This will include any tuition and education costs and will arrive in January.
For stock sales and capital gains, which come in sometimes between January to mid-February
This applies for dividends paid and interest earned for over $10, which should also come in sometimes between January to mid-February
This applies to health savings account distributions and should come in sometimes between January to mid-February
For state and local tax refunds, which should arrive in January
This applies for credit card payment for sharing economy income and should arrive in January
This only applies to non-employee income or rental income and will arrive in January. If you’re a freelancer, then you should have one of these forms.
This is the distribution from a retirement plan or IRA arriving in January
This will have your health savings account distributions
This has a partner’s share of income, deductions, and credits, which has its own business filing date
Your social security income arriving in January
These forms can feel overwhelming and even complicated for first-time tax filers. To get the most out of your taxes and make each year easier than the previous year, seek help from a professional tax preparer. This will ensure that you have everything you need, and you won’t make any mistakes on your tax return. Everyone wants to get the most they possibly can back from their return, and it’s fair that you do. Stay organized and do what you can and seek help for anything you may have in question.
(H2) Help And Advice From Professionals
Clifford Ross Raudenbush & Cooper has helped thousands of people understand new rules and regulations when it comes to taxes. If you want professional tax advice, then give us a call and see how our tax preparation and planning can help you.