The mere thought of preparing and filing your tax return may cause significant anxiety in many people. This is a task that you understandably may want to avoid for as long as possible each year, but it must be done. Some people even receive a tax refund as a result, so you may enjoy a financial benefit from the effort. Nonetheless, preparing a tax return can seem complicated and confusing to many people. By walking through these steps, you can more easily tackle this annual task.
Research Filing Dates
Most people are aware that the tax filing date is April 15, but there is some variation to this each year. For example, if April 15 falls on a Sunday, the filing date may be April 16 that year. Because there is some fluctuation to the actual day each year, always research the filing deadline well ahead of time. Avoid waiting until the last minute to file your tax return.
Gather All Relevant Documents
You may start receiving tax documents in the mail in January. Collect these documents in a file folder so that they are immediately available as needed. You also will need to gather receipts, W-2 and 1099 tax forms and all other relevant documentation. It is easier and faster to complete your tax return when the required documentation is in front of you.
Download Financial Documents
Some financial institutions require you to download tax documents from their website. Log onto your account for each financial institution that you have an account with, and print the tax documents. An alternative is to save all of the documents in one folder on your computer. However, you should maintain copies of these documents for the next seven years.
Determine Your Tax Filing Status
The next step to take is to determine who will be filing a tax return with you. If you are single and have no children, it is easy to determine your filing status. If you are married, you can file jointly or separately under a few different filing statuses. You also need to determine who your dependents are, and you will need to gather any relevant financial information that is needed for their portion of the tax return.
Use a Tax Calculator
As early in the tax season as possible, it is helpful to use a tax calculator to estimate your tax liability for the year. Many people are pleased to learn that they will receive a refund. However, if you owe taxes this year, learning about this possibility sooner may help you to be better prepared to pay the taxes by the due date.
Choose the Right Tax Form
There are various tax forms that you may use when filing your return. For example, the 1040EZ is ideal for individuals who have no complicated tax situations or special deductions. 1040 may be needed if you need to attach multiple schedules to your tax return if you have dependents or if other special situations apply.
Select a Tax Prep Program
After you have taken these steps, you are ready to actually prepare your tax return. The most common way for individuals to prepare their own tax returns is through the use of a tax prep program, and there are a few popular options to consider. If you are filing a 1040EZ form, you may be able to fill out the form by hand in a few minutes and file by mail.
Consider Hiring an Accountant
If you have a very complicated tax return or if you are unsure about how different laws and regulations affect you, it is better to hire an accountant than to take chances. A tax accountant is familiar with the latest laws, and professional filing may help you to avoid issues with the IRS if you get audited. In some cases, an accountant may help you to find deductions that you were not aware of, and there can be substantial financial benefit from this.
As tax season approaches, you understandably may begin thinking about filing your tax return. It is easy to procrastinate until the last minute when you are concerned about a stressful, complicated tax preparation process. However, when you follow these simple steps, you can complete your tax return efficiently.