Tax season is upon us. Preparing to file your tax return can be an extremely stressful time. However, if you take the proper time and steps to prepare, your filing can be a smooth process. Continue reading to learn how to prepare yourself for tax season.
Plan If You Need An Extension
As April 18th rapidly approaches, you may be crunched for time to gather all of your documents and take the time to file. If you need extra time, file an extension by April 18th to have your tax filing deadline to October 16th. However, the catch is you still need to pay an estimate of the taxes you will owe if you want to avoid penalties and interest.
Decide Who Will File
Filing your taxes can be a stressful process. For some, the language and verbiage used by the Internal Revenue Service (IRS) can read like a completely different language. If you have many changes to your taxes from last year or are too stressed to file on your own, consider using a tax preparer. There are many different big-name companies that offer tax preparation, as well as local accountants that offer the same service but individualized.
Know Your Filing Status
Prior to beginning to file your tax return, you need to determine what status you will be filing under. The IRS has five different filing statuses:
- Head Of Household: Unwed people who pay at least half of the cost of housing and living expenses on behalf of another person.
- Married Filing Separately: Married people who are high income earners may use this filing status.
- Married Filing Jointly: Most married couples use this filing status
- Qualified Widow Or Widower: People who recently lost a spouse and are supporting a dependant.
- Single: Unwed people who do not qualify for any other filing status.
Finalize Contributions
While the deadline for 401(k) contributions is the end of the year, you can still contribute to your IRA before the tax deadline within the limit for the previous year. For example, if you did not reach the $6,000 contribution limit for 2022 in your IRA, you can maximize your contribution until the tax filing deadline of April 18th, 2023.
Gather Your Documents
To properly file your tax return, you will need to reference a multitude of documents. Whether you are filing your return yourself or utilizing a tax preparer, you will need to gather a plethora of documents. Some of these documents include:
- Income Documents: W-2s from employers and 1099-MISC or -NEC from contract or freelance work.
- Form 1098: You’ll receive this document from your mortgage servicer if you are a homeowner that describes the amount of mortgage interest you paid in the year.
- Form 1098-E: If you have student loans, you’ll receive this document with the amount of student loan interest you have paid.
- Form 5498: If you contribute to IRAs, your brokerage will send you this document listing your contribution amounts for the year.
- Form 1099-DIV: Any income you received from dividends or distributions from investments, even rental properties, will be listed on this document.
Having your documents put together ahead of time will make the filing process smoother.
You can never start tax planning too early. If you need assistance tax planning throughout the year, our advisors at Curo Wealth Management are happy to help. We can help you pick the most beneficial strategies based on our knowledge and expertise. Schedule a consultation with us today to get started.
Sources:
https://www.nerdwallet.com/article/taxes/tax-filing
https://www.nerdwallet.com/article/taxes/how-to-choose-tax-filing-status
https://www.cnbc.com/2023/01/11/deadline-to-max-out-retirement-accounts-for-2022.html