How do you prepare for tax day?
(a) You think about purchasing Tax-Preparation Software, and then you stress over the errors you made by filing your own taxes.
(b) You procrastinate and ignore the inevitable until the 6 O’clock News reminds you that it’s TAX DAY tomorrow!
(c) You always file for an extension.
(d) As soon as you get all your tax documents assembled, you call to schedule an appointment with your CPA.
No matter how you tackle tax preparation, it is often an unpleasant task for many personality types. Here are 5 Tips for Tax Day Preparation to make it go more smoothly, and ultimately to help maximize your refund.
#1. Begin Today
First, after reviewing the 5 Tips, do not procrastinate. This year you happen to gain a few days since tax day falls on April 18, 2017. However, this doesn’t give you permission to put it off! The truth is as the tax deadline draws closer, your stress levels often rise. If you get started as early as possible, you will have time to explore all your options. Consequently, while you minimize your stress you will be better equipped to maximize your return. Also if you will owe money to the IRS, wouldn’t you rather know this weeks rather then days, or even hours ahead of time?
Safety Tip: By filing early you reduce your risk of tax fraud. Tax identity fraud is still a real threat. Typically scammers file a tax return using personal information, gambling on your procrastination, and then pocket your refund. Be one step ahead of them and file as soon as possible.
Extra Bonus: You get to check it off your “to do list” – whew that’s done!
#2. Organize Your Documents
Throughout the year it is important to store and organize important tax documents and necessary receipts. And, no, a shoe box or that bulging file drawer that serves as the ‘black hole’ does not qualify as being organized! To prepare, begin with gathering the basics: the prior year tax return, W-2 forms, 1099-MISC if you’re an independent contractor, 1099’s from bank and investment accounts, 1095 forms as proof of health insurance status, just to name a few.
Organizing Tip: Scan all of your documents. (Farewell shoe box!) If you are a client, just login and upload your documents. Easy!
At Dean Anatra CPA, we strive to GO GREEN, so our tax filing system leans towards going paperless!
#3. Explore Your Deduction Options
Many people just assume the standard deduction is their only option. A CPA’s mission, when it comes to tax returns, is to know all available options – you may be surprised to find that you have itemized tax deductions available.
Note: Whether you itemize or not, remember to include “above-the-line” deductions such as IRA contributions, health savings account (HSA) or educator expenses.
#4. Make Your Retirement Contributions
You can still make contributions to your IRA until the tax-filing deadline in April and credit them to your prior year taxes.
The maximum contribution for the 2016 tax year is $5,500 and $6,500 if you are over 50 years of age. Whenever possible, max out your contribution to get the best tax advantage and at the same time caring for your ‘nest egg’.
#5. Schedule An Appointment With Your CPA
I know what you are thinking, coming from a CPA’s blog, “Isn’t this a self-serving idea?” Well you be the judge, but consider some facts: Tax forms and tax laws are complex and subject to change. Any personal changes—buying or selling a home, getting married or starting a family—can affect your tax return. You may be missing out on deductions or strategies that could bring you the greatest tax advantage this year, as well as in years to follow.
Bonus: Having a professional handle your tax return not only offers you peace of mind, but often additional income as well. So use the extra time to do something you actually enjoy.
Happy Tax Season!
The purpose of this article is to provide information, rather than advice or opinion. It is accurate to the best of the authors’ knowledge as of the date of the article. Accordingly, this article should not be viewed as a substitute for the guidance and recommendations of a retained professional.