The Do's and Don'ts of Tax Season
Americans are divided on many issues, but there's one topic that draws unanimous complaints: tax season. That's especially true this year, when tax reforms are creating uncertainty about which deductions people can claim and how much they'll owe. But with the right mindset, filing your taxes can be simple and straightforward.
Here are some do's and don'ts that may help with tax season:
- Verse yourself in the new tax laws. Although most of the tax code changes apply to income earned during 2018, it's possible that it could still impact your 2017 filings. For example, the recent reforms lowered the threshold for claiming medical expenses. If you itemize your medical expenses on your deductions, you can now claim amounts in excess of 7.5 percent of your income, as opposed to the previous 10 percent. You may also be able to claim property damage deductions as far back as 2016 if you lived in an area that was declared a federal disaster zone. Such property damages no longer need to be itemized — you can claim them along with the standard deduction. It's worth reading up on the changes to make sure you're taking advantage of these and other new tax breaks, and that your deductions are fully compliant.
- Kill two birds with one stone. As tedious as tax prep can be, you're best served by knocking it all out in one go. Set aside a day to organize your paperwork and file both your federal and state taxes. Failing to file either on time leads to penalty charges, and it usually means that you'll be late on your payments to the IRS and your state treasury. Late charges and fees accumulate quickly, so batching your tax prep saves time, money, and aggravation.
- Ask for help. When it comes to tax season, there are a few different ways to prepare. You can file on your own, try using a tax software like TaxAct®, or hire a tax preparation service. If your tax obligations are simple and straightforward, saving the few hundred bucks you'd spend on professional tax preparation may make sense. But if you find yourself uncertain about a number of deductions and expenses, ask for help so that you're on the safe side. You may qualify for free tax prep assistance if your income falls below a certain threshold or if you're a military personnel member. Barring those options, call around to different accounting firms and find out which local offices offer the best tax prep rates. Fortunately, you can deduct your tax preparation expenses, which should soften the financial blow of hiring a professional.
- Wait until the last minute. If you haven't already, organize your tax forms now. In addition to your W-2, you may have W-9s from any self-employment or contracting income, along with forms related to health coverage, interest paid on student loans, or earnings from interest-accruing savings or investment accounts. Your bank or lender will provide official payment or earnings statements, so if you haven't received those yet, get in touch with those institutions to make sure you didn't miss an important notice.
- Make extra work for yourself. Unless you've had a significant change in your circumstances, such as getting married or receiving major windfalls, your 2018 return will look quite similar to your 2017 filing. Reference a copy of last year's return as you work through this year's to speed up the process. The less attention you spend on minor or repeated details, the more bandwidth you have to parse new allowances and review anything that seems unclear.
- Guess at important deductions and filing requirements. Whether you're unsure of how much you've earned from a side business or you're uncertain about which charitable donations can be included in your filing, do your best to chase down the numbers. If you're not working with a tax preparation professional, visit the IRS website — it has plenty of resources to help you file an accurate return.
A Stress-Free Tax Season Is Within Reach
If you take the time to file your return correctly, and you're willing to recruit help when you encounter challenges, doing your taxes can be a painless experience. Besides, the more proactive you are, the better your chances are of spotting an extra deduction and getting a larger return this year.