Each year, the IRS receives over 100 million individual income tax returns. As the year winds down, it’s time to get ready for tax season and the April 15 filing deadline. No one looks forward to filing their tax return unless you’re expecting a good refund, but it’s always better to be on time than to risk penalties. As the saying goes, the only certainties in life are death and taxes. Luckily, tax filing doesn’t have to be painful. Here are our best tips for an easy tax season.
The first step is to gather the necessary forms, which you should receive in the mail by early February. If you’ve signed up for electronic delivery of tax forms, you’ll need to log in to your account(s) to download your forms. This includes one or more W-2s from any part or full-time jobs you held during the year, 1098 forms documenting your student loan and/or mortgage interest payments, and Schedule K-1s from any investment accounts or other ownership interests you have.
If you are self-employed or work as a contractor, you may receive 1099 forms from your employer(s) or client(s). If you purchase health insurance coverage on the marketplace, you’ll need a 1095 form. You’ll also want to gather records of deductible expenses that you’ve been saving throughout the year.
Update any Life Changes
Have you changed your name after a marriage or divorce? You’ll need to notify your employer and the Social Security Administration so your tax return matches SSA records. If you’ve gained or lost family members, purchased property or had some other major life change throughout the year, you will want to revise your W-4 to account for those as well. The IRS recommends doing this every year.
If you use an Individual Taxpayer Identification Number (ITIN), make sure you’re not close to the expiration date. You may also need your adjusted gross income from the previous year to verify your identity when filing electronically.
Do you need to adjust your withholdings?
If you usually owe money on your tax return or have experienced a big change in income this year, you may need to submit a new W-4 to increase the amount withheld from each paycheck.
Another way to maximize your tax savings before the end of the year is to max out your retirement account contributions.
To Itemize Deductions or Not
At the end of 2017, Congress passed an overhaul of the US tax code. One of the biggest changes for individuals is the increased standard deduction: $12,000 for individuals and $24,000 for married couples. So, unless your itemized deductions total more than the standard deduction for your category, there’s no need itemize. However, it’s worth noting that the child tax credit was raised to $2,000 per dependent child under age 17. Here are some other deductions to look out for:
- Charitable contributions paid through payroll deductions when employees retain pay stubs as proof.
- Earned income tax credit for low-to-moderate-income families.
- Mortgage interest is still deductible for home loan values up to $750,000.
Take Advantage of the Free File Program
The IRS offers its Free File program at IRS.gov. There are two options based on your income:
- <$66,000: File your taxes with free, easy to use software, including state return options.
- >$66,000: Offers basic guidance and math computation. You’ll need your previous year’s tax return for reference. This option works for taxpayers who are comfortable completing their own returns.
Tax Refund Loans Aren’t Worth It
While many tax preparers offer tax refund loans, you won’t actually get your refund that much quicker. Plus, these providers skim a percentage of your return off the top. Before you apply for a tax refund loan, keep in mind that the IRS expects to issue more than 90 percent of refunds within 21 days. To ensure the expediency of your tax refund, you can file your refund electronically and choose direct deposit. The IRS reports that more than three out of four refund recipients will go this route. For comparison, paper returns will take a minimum of seven weeks for refunds to be issued.
Don’t Be Scammed
While tax scams can happen at any time of year, they are especially popular between January and April. Remember that the IRS will never contact you via email, text message, or social media to request sensitive information. If someone calls and threatens you with arrest unless you immediately pay a fee, that is also a scam. Check out the full list of alerts on the IRS’s tax scams/consumer alerts page.
Beware of tax preparers who earn a commission based on the size of your refund. This is an incentive to inaccurately fill out forms, which puts you at risk with the IRS. When looking for a tax preparer, always make sure they will pay any penalties resulting from filing errors.
Not ready to file? It isn’t the end of the world.
If April 15 comes around and you’re simply not prepared to submit your tax return, you can always file for an extension. If you expect to receive a refund, it is important to be thorough in your documentation. If you need more time, the IRS will give you six more months—until October 15—to finish filing if you complete the 4868 form by April 15. That said, you will be required to pay any taxes owed by this date. You may also have to pay interest on the amount you owe.
The First is your local financial partner
Have questions about taxes or your overall financial situation? Your community bank is here to help. Learn about our Financial Planning services and meet our Trust & Wealth Management team. You can also visit one of our 12 branches in Bucks County for friendly service and help with all of your financial needs and goals.
This information is provided with the understanding that the association is not engaged in rendering specific legal, accounting, or other professional services. If specific expert assistance is required, the services of a competent, professional person should be sought.