Save Time and Worry by Having These Tips Ready at Tax Time
Whether you do your own taxes or use a tax-preparation professional, having some basic information, facts, and figures on hand is key to a (hopefully!) painless process. But first, know what some of the common tax filing mistakes are, according to the IRS:
- Missing or inaccurate Social Security numbers
- Misspelled names
- Incorrect filing status
- Math mistakes
- Figuring credits or deductions
- Unsigned forms
These are common preparation issues, but preparing and filing taxes can be different for everyone, so tailor this tax prep checklist to you and your family’s situation and circumstances to avoid these frequent errors.
√ Have the previous year’s returns
Having last year’s federal and state returns on hand provide a ready refresher on the previous year’s filings and the documents used. If using tax software to file, many systems can upload prior year returns and avoid manually keying in information, and the unintentional mistakes that can lead to.
√ Have everyone’s Social Security and/or tax ID numbers
Have the social security and/or tax ID numbers for yourself, spouse, and all dependents on hand. Remember, in addition to children, dependents can also include elderly parents and others legally in your care.
√ Have banking information
If paying a tax bill or, better yet, receiving a refund directly through a bank account, you will need routing and account numbers handy. Let Kansas City Credit Union know if you need assistance in gathering your account information.
√ Know your income and the details around it
Have all documentation around income received the previous year. This information can come in several forms, including the most common, a W-2. Employers must issue or mail W-2s by January 31, so expect those via post or email by that time.
1099s are issued to freelancers, contract workers, and generally those who are not considered a full-time employee by the issuing organization, and so do not withhold taxes. There are a number of 1099 forms for even more specific sources of income, such as lottery and gambling winnings or goods and services paid for through a third-party system, like PayPal or Venmo, so know which 1099 to expect.
However you earn your money – know who paid it, how much they paid, and what form was used to document it.
√ Investments
Investment programs issue earnings statements, so have those on hand in case you need information about earnings or losses.
√ Deductions
Deductions help reduce taxable income and, again, the key is documentation. Popular tax deductions include retirement account contributions, educational expenses, medical bills, property taxes, mortgage interest, and charitable donations.
√ Credits
And, finally, tax credits which provide dollar for dollar cuts for any taxes owed. But, as with deductions, documentation is needed to claim them. Common tax credits include the child tax credit and retirement savings contributions.
By proactively gathering these essential documents and information, you can streamline the tax preparation process, avoid common and time-consuming mistakes, and maximize your potential deductions, credits and, most importantly, a possible refund!
Take the time to adapt this checklist to your unique financial situation and set yourself up for a less stressful, and more successful, tax season.
