Ways You Can Make Tax Season a Little Easier

Preparing and submitting tax returns requires careful attention to detail and adherence to specific guidelines. By taking proactive measures, you can streamline the experience. This article provides practical strategies to simplify your annual tax preparation.

Gathering and Organizing Your Information

Gather and organize all necessary financial documents throughout the year. For income, you will typically receive Form W-2, Wage and Tax Statement, from employers detailing your wages, tips, and other compensation. If you have income from other sources, such as interest, dividends, or capital gains, you will likely receive various Form 1099s, like 1099-INT for interest income, 1099-DIV for dividends, or 1099-B for proceeds from broker and barter exchange transactions. Those who work as independent contractors or in the gig economy will receive Form 1099-NEC, Nonemployee Compensation, if payments exceed a certain threshold.

Beyond income, you also need to collect documentation for potential deductions and credits that can reduce your taxable income or your tax liability directly. This includes receipts for eligible expenses, records of charitable contributions, and statements for medical expenses if you plan to itemize deductions. If you pay student loan interest, you will receive Form 1098-E, Student Loan Interest Statement. For mortgage interest paid, Form 1098, Mortgage Interest Statement, is provided by your lender.

Maintaining an organized system for these documents year-round can prevent last-minute stress. Consider creating a dedicated physical folder or a digital folder on your computer for tax-related documents as they arrive. Scanning physical receipts and storing them digitally, perhaps in a cloud-based service, can also be beneficial for easy access and backup. Regularly updating a simple spreadsheet with income and expense categories can also provide a clear overview of your financial activity.

Understanding Important Deadlines

Awareness of key tax deadlines is important for managing your tax responsibilities effectively and avoiding potential penalties. The primary federal income tax filing deadline for most individual taxpayers is April 15th. If this date falls on a weekend or holiday, the deadline shifts to the next business day.

If you are unable to file your return by the April 15th deadline, you can request an extension, which typically moves the filing deadline to October 15th. It is important to remember that an extension to file is not an extension to pay any taxes owed. If you anticipate owing taxes, you should estimate and pay them by the original April 15th deadline to avoid interest and penalties.

Certain taxpayers, such as self-employed individuals or those with significant income not subject to withholding, may need to make estimated tax payments throughout the year. These payments are generally due on specific dates: April 15th, June 15th, September 15th, and January 15th of the following year. These dates also shift to the next business day if they fall on a weekend or holiday. While federal deadlines are consistent, individual states may have different filing and payment deadlines, so it is advisable to confirm those specific dates.

Deciding How to File

Many individuals opt for self-preparation using tax software. This approach can be cost-effective, with various options available ranging from free to paid versions, and it offers direct control over your tax return. However, it requires a certain level of comfort with financial figures and a time commitment to input data accurately and understand the software’s prompts.

Alternatively, engaging a professional tax preparer provides expertise and can save you considerable time and effort. Professionals can navigate complex tax situations, ensure compliance with current tax laws, and potentially identify deductions or credits you might overlook. This option is particularly beneficial if you have a complicated financial situation, such as owning a business, experiencing significant life changes like marriage or a new home purchase, or having diverse investment income. The cost for professional services varies widely, typically ranging from a few hundred dollars to over a thousand, depending on the complexity of your return and the preparer’s experience.

For eligible taxpayers, free tax help options are also available. The IRS Free File program allows taxpayers with an Adjusted Gross Income (AGI) below a certain threshold to prepare and e-file their federal tax returns for free using guided tax preparation software provided by IRS partners. The Volunteer Income Tax Assistance (VITA) program offers free tax preparation to individuals who generally make $64,000 or less, persons with disabilities, and limited English-speaking taxpayers. When deciding, consider the complexity of your tax situation, your comfort level with financial details, the time you can dedicate, and your budget.

Steps After Filing Your Return

It is important to keep copies of your filed tax return and all supporting documents. The Internal Revenue Service (IRS) generally recommends retaining these records for at least three years from the date you filed your original return or the due date of the return, whichever is later. This three-year period aligns with the typical statute of limitations for the IRS to audit your return or for you to file an amended return to claim a refund.

If you are expecting a refund, you can monitor its status using the IRS “Where’s My Refund?” tool, which typically updates within 24 hours after e-filing. If you owed taxes and made a payment, you should confirm that the payment has been processed, which can often be verified through your bank statement or the IRS Direct Pay system. Should you receive a notice from the IRS after filing, it is important to review it carefully and respond promptly with any requested information or clarification. These notices are often for minor issues or requests for additional documentation, rather than a full audit.