January 13, 2021You made it through 2020, so don’t let the upcoming tax season throw you for a loop. Here are a few tips and tools to help make sure you’re prepared.
- Get Organized. It sounds simple but it’s the best place to start! Gather up the social security numbers of everyone you list on your tax returns—you, your spouse and/or children. Then, gather any of the following documents you may have:
|Investment Property Income and Expenses
|Debt Cancellation Documentation
|Student Loan Interest
|Other Miscellaneous Income or Expenses
- Decide how you will file your taxes. You can choose to use a CPA or accounting firm, an online filing source or one of the many free IRS-approved agencies available. Consider any major changes in your life this past year like marriage, a new baby or starting a business. If any of these apply to you, your taxes may be more complicated, and you may want professional help.
- Assess your finances for credits or deductions. These are SIGNIFICANT ways to impact the amount of you owe. A deduction can lower your taxable income and the tax rate that is used to calculate your taxes. A credit reduces the amount of tax giving you a larger refund; and some tax credits can give you a refund even if you have no withholding. You can review the list of official IRS deductions and credits here.
- Double check your paycheck withholdings. This won’t change your 2020 taxes but it’s a great time to update your paycheck withholdings for future taxes. If you are not having enough tax withheld from your paycheck, you will owe taxes when the time comes. Likewise, if too much is being withheld, you’ll get a refund. You may prefer one way over the other, it’s a personal preference. Use the IRS’ tax withholding estimator to do a checkup on your paycheck and adjust your withholding for 2021.
- Always protect yourself from tax scams and fraud. As usual, tax season is a time for fraudsters to make an appearance. You may receive phone calls, eMails or text messages claiming to be the IRS. It’s best to ignore these, as the IRS will only communicate with you through the US mail. Another way to avoid fraud is to set up direct deposit for any refunds. This way you know exactly where your refund is going.