Feeling uneasy about the thought of Tax Day around the corner? Don’t worry, you’re not alone. Filing taxes can be overwhelming, but there are a few things you can do to make it less stressful. In this article, we’ll go over five tips to help you prepare and make the process smoother. Let’s get started:
Make sure you have all your necessary tax documents and that they’re the most up-to-date, correct versions. Having complete and correct documents will ensure that you or your accountant can prepare your taxes accurately and efficiently. Misinformation on forms or missing forms could result in tax submittal delays and/or late fees.
Review your milestones for the last year. Did you get married or have a baby? Did you buy a house? Noting anything that’s new or different about your financial situation from last year will help you to analyze what aspects may change from year to year and help you determine any additional documents that might be needed.
Keep a record of your charitable contributions from your IRA. If you made a qualified charitable distribution (QCD) from your IRA, the Gross Distribution amount reported in Box 1 of the 1099-R you received will include the amount of the gift to charity. Remember to advise your tax preparer of the QCD so that the gift is excluded from your IRA distribution taxable amount, rather than treated as a taxable distribution (or claimed as a deduction on Schedule A). Failure to inform your tax preparer of QCDs may result in the overpayment of income taxes.
Consider deductions at both the federal and state level to maximize tax savings. Although the 2017 Tax Cuts and Jobs Act reduced or eliminated certain deductions for federal income tax purposes, you may still be able to claim them on your state return. Examples include property taxes, income taxes, and charitable contributions to name a few.
Maximize retirement plan contributions. If you can’t afford the maximum, try to contribute the amount that will be matched by employer contributions. Then work your way up each year or if you get a bonus or raise. The money you put in these accounts reduces your taxable income for the year, which reduces your tax bill. It isn’t taxed until you withdraw it.
With the right preparation, you can make the tax filing process more manageable and ensure that you’re taking advantage of all available deductions and savings. Just start early, stay organized, and give us a call if we can help you along the way.
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