Tax Day: it comes every single year on April 15 (though it’ll be April 17 this year, due to a quirk in the calendar). And yet, it’s easy to feel unprepared. But getting started now means you can approach April dreaming of the spring thaw, rather than dreading your taxes.
Make this the year that you sail through tax season! Check out these 5 tips that may just make it a little less, well, taxing.
1. Research tax deductions or credits you might qualify for
Statistics suggest that many of us are likely leaving money on the table. In fact, tax payers who itemized their deductions realized $1.2 trillion in savings, while those who took the standard deduction only claimed $747 billion. Makes you wonder if those who didn’t itemize might be missing some sweet returns.
Here are some categories you might not have considered:
- State or federal tax credits for energy-efficiency improvements
- Moving expenses for job relocation
- Mortgage interest
- The Earned Income Tax Credit (EITC), which about 20 percent of eligible low- or moderate-income workers fail to claim
- Childcare credit
2. Gather the important paperwork
Once you’ve identified which credits or deductions you might be able to claim, start assembling all the paperwork you need. Now’s the time to figure out if you have everything required to easily file your taxes or if you need to track it down. Here are the key documents that taxpayers should have ready:
- W-2 forms
- Forms that show your investment contributions and income, such as statements from your investment accounts
- Expense related to your home business, if claiming your home as a write-off for business purposes
- Social Security benefits, if applicable
- Expenses related to moving or job hunting
- IRA contributions
- Childcare costs
- Proof of charitable donations
- Medical and dental expenses
- Other paperwork as applicable to your situation
3. Research tax preparation methods
Fewer than 10 percent of people get out their forms and calculators and figure out their taxes by hand. The rest of us are split almost evenly between filing with one of the many software programs available or using a paid tax preparer.
Using a tax preparer will save you a ton of time, and you may end up actually saving money if they’re able to direct you to credits or deductions you didn’t know about, so it’s worth considering.
If you’re going to use a software program, do some research to find the one that has the features you need.
4. Figure out if you should adjust your withholding going forward
While it seems exciting to get a tax refund, remember that’s money that you could’ve been using all year long, instead of loaning it to the government. The ideal situation is not to owe money, or get any back, so see if your withholding is at that perfect equilibrium.
5. Get organized for next year
Are your 2017 files in shambles? Now’s the time to get organized for 2018! One of the most challenging parts of getting your taxes ready is finding all your documentation. And it can cost you more than time. In fact, you can’t claim deductions or credits if you don’t have the appropriate paperwork, such as medical bills or receipts for charitable deductions. So figure out the system that works best for you and vow to use it.