8 Tips To Prepare You For Tax Season
Tax season is underway, so it's important to know how to properly file your taxes and get the most out of your return. We asked our friends at the Farm Bureau Tax Service to share some of their top pieces of advice for tax season preparation. From organizing your documents to making informed decisions about tax preparation, these tips are designed to keep you on top of your tax game. So let’s dive in!
8 Tips For Tax Season:
1. Keep Track Of Important Documents.
The first step to a successful tax season is to gather and organize all your important documents. This includes W-2 forms, 1099 forms, receipts, Social Security statements, and any other relevant paperwork. Looking at your return from last year is a good way to notice if anything is missing. Creating a designated folder or using digital tools to store these documents will make your life much easier when it comes time to file your taxes.
2. Decide Who Will Prepare and File Your Taxes.
One crucial decision you need to make is whether to prepare and file your taxes yourself or seek professional assistance. While some individuals are comfortable tackling their taxes independently, others prefer the expertise of a tax professional. Consider your own comfort level, the complexity of your tax situation, and the time you need to dedicate to the task.
The Advantages of Working with a Tax Professional:
Expert Knowledge:
Tax professionals, such as Certified Public Accountants (CPAs) and tax preparation companies, possess extensive knowledge of tax laws and regulations. They stay up-to-date with the latest changes, ensuring that your return is accurate and compliant.
Personalized Guidance:
Tax professionals can provide tailored advice based on your unique financial situation. Whether you’re a business owner, a freelancer, or a salaried employee, they can identify potential deductions and credits that apply specifically to you.
Minimizing Errors:
Tax professionals are well-versed in navigating complex tax codes, reducing the chances of errors or omissions on your return. This lowers the risk of facing IRS audits or delays in processing.
Time and Stress Savings:
Tax season can be overwhelming, especially if your financial situation is intricate. Hiring a tax professional takes the burden off your shoulders, allowing you to focus on other priorities while ensuring your taxes are in capable hands.
Audit Support:
If you face an IRS audit or have questions about your tax return after filing, tax professionals can represent you and handle the communication with the IRS on your behalf.
Types of Tax Professionals and Services:
Certified Public Accountant (CPA):
CPAs are highly qualified professionals with in-depth knowledge of tax laws and accounting principles. If your financial situation is complex, you run a business, or you need detailed tax planning, a CPA can provide personalized advice and ensure that you’re optimizing your tax deductions and credits.
Tax Preparation Companies:
Big tax organizations like H&R Block offer tax preparation services with trained tax professionals. These companies are often more affordable than hiring a private CPA and can handle a wide range of tax situations, from simple to moderately complex.
Farm Bureau Tax Service:
If you’re looking for personalized assistance from professionals who understand the unique tax needs of individuals and businesses in Tennessee, the Farm Bureau Tax Service is an excellent choice. Their team of experts is well-versed in local tax laws and can provide tailored advice to help you maximize your deductions and minimize your tax liability.
Online Tax Filing Software:
If your tax situation is relatively straightforward and you feel confident navigating the tax process on your own, online tax filing software, such as Turbo tax, can be a convenient and cost-effective option.. These platforms guide you through the process step-by-step and can help you identify deductions and credits.
By carefully considering your financial situation and preferences, you can make an informed decision on who will prepare and file your taxes. Remember, seeking professional assistance can be a wise investment that pays off in accuracy, peace of mind, and potential tax savings.
3. Make An Appointment.
Many tax returns are filed around the same time of year, each and every year. If you choose to work with a tax professional, making an appointment early will guarantee that your time slot is available with your tax preparer, create a deadline for you to work towards, and put your mind at ease that the process is underway.
4. Understand The Process.
Your tax preparer works for you, but it’s important to have a basic understanding of the tax-filing process to stay informed and engaged throughout the journey. The process can be broken down into several key steps, and knowing what to expect can make the entire experience more manageable. Let’s take a closer look:
Gather Your Documents:
As mentioned above, the first step to filing your taxes is to gather all the necessary documents. These include W-2 forms, 1099 forms, receipts and records, such as medical expenses, charitable donations, and business-related costs.
Choose Your Filing Status. Your filing status determines how you’ll be taxed and affects your standard deduction and tax bracket. The most common filing statuses are:
Single: Unmarried individuals who aren’t eligible for any other filing status
Married Filing Jointly: Married couples can combine their income and deductions on a joint tax return.
Married Filing Separately: Married couples can choose to file separate tax returns.
Head of Household: Individuals who provide a home for a qualifying dependent, such as a child or parent.
Choose Your Deductions:
Deciding whether to take standard deductions or itemize your deductions can significantly impact your tax liability. The standard deduction is a fixed amount determined by the IRS and varies based on your filing status. Itemized deductions involve listing specific expenses and may be beneficial if your deductible expenses exceed the standard deduction.
Calculate Your Tax Liability:
Once you’ve gathered your documents and determined your filing status and deductions, it’s time to calculate your tax liability. This involves applying the appropriate tax rates to your taxable income and factoring in any tax credits you may be eligible for. Tax credits directly reduce your tax liability and can lead to a higher tax refund or lower tax bill.
By comprehending the tax-filing process and knowing what’s expected at each stage, you’ll be better prepared to work with your tax professional, ask informed questions, and ensure that your tax return is accurate and optimized for the best possible outcome.
5. Be Alert For New Documentation.
Tax laws and regulations are subject to change, and the IRS may introduce updates or revisions that could impact your tax situation. To keep your tax preparer well-informed and ensure accurate filing, it’s essential to be on the lookout for any updates that may affect you.
One area to pay particular attention to is your financial accounts. Whether it’s a new bank account, an investment with potential tax implications, or changes in existing accounts, promptly communicating this information to your tax preparer is crucial. Having up-to-date and accurate records of all your financial activities will ensure that your tax return reflects your current financial standing and maximizes your potential deductions.
Additionally, if you’ve received any correspondence or notices from the IRS, it’s crucial to pass this information along to your tax preparer promptly. The IRS may send updates related to your taxes, and your tax professional can address any questions or issues raised by the IRS on your behalf.
6. File an Accurate Return.
Accuracy is key when it comes to filing your taxes. Take the time to double-check all the information you provide and ensure that you haven’t missed any important details. Simple errors or omissions can lead to delays in processing your return or, worse, trigger an audit. So be meticulous and thorough, and if you’re unsure about anything, seek clarification from a professional.
7. Plan for an Extension Now if You Need One.
As the tax deadline approaches, you might find yourself needing more time to file your tax return accurately. Fortunately, the IRS allows taxpayers to request an extension, providing an extra six months to submit their returns. However, it’s essential to understand when and how to request an extension.
When to Consider a Tax Extension
There are various reasons why you might consider filing for a tax extension:
Complex Tax Situation:
If you have a complicated financial situation, such as multiple sources of income, business ownership, or complex investments, preparing your taxes might take longer than usual.
Gathering Missing Information:
If you’re missing essential documents or waiting for updated tax forms, an extension can give you the necessary time to collect everything accurately.
Life Events:
Significant life events, such as moving, marriage, or the birth of a child, can create disruptions and make it challenging to focus on tax preparation.
Unforeseen Circumstances:
unexpected events, such as natural disasters or health issues, can disrupt your ability to file on time.
Requesting a tax extension is relatively straightforward. To get an automatic extension of six months, you’ll need to fill out IRS Form 4868. But just remember: filing an extension grants you more time to submit your return, but it doesn’t extend the deadline for paying any taxes owed. If you anticipate owing taxes, it’s crucial to estimate the amount and pay it by the tax deadline to avoid penalties and interest.
8. Start on Next Year’s Taxes.
It may sound early, but starting to prepare for next year’s taxes now can save you a lot of hassle down the road. Keep track of any changes in your financial situation, make note of deductible expenses, and consider implementing an organizational system for your tax documents. By staying proactive, you’ll be well-prepared and ahead of the game when tax season rolls around again. You’ll be thanking yourself next year for being so well prepared.
Conquer Tax Season with Confidence
Tax season doesn’t have to be a headache if you follow these friendly tips from our friends at Farm Bureau Tax Service. Remember to stay organized, seek assistance when needed, and file your taxes accurately and on time. By taking these steps, you’ll breeze through tax season with confidence and ensure that you’re making the most of your hard-earned money.
