Filing your federal income tax return can be overwhelming, but you can deal with tax season one step at a time, avoiding beginner mistakes, while taking advantage of money-saving opportunities.
Monitor Your Income
You must file a tax return if you meet or exceed certain income levels during the year. If you are employed, look on your pay stub for “to date” income, and if you have more than one job, be sure to add up your income from all of your employers. Remember to include income from other sources as well, such as money you earn on rental properties, anything you sell, investments, or interest.
Keep Appropriate Documentation Throughout The Year
Stay on top of tax-related documentation throughout the year; it’ll make things easier for you during tax season. You may want to save receipts for things like charitable donations, work-related expenses and medical bills, or any other item from step 4. You can also save statements for student loans or investments and any grants or scholarships. Having them on hand and in order can help you determine whether to detail and facilitate the process. Also, you should save the documentation after filing your taxes. The IRS recommends keeping the records for at least three years.
Pay Attention To Your Deadlines
Receiving your tax documents in January or February gives you approximately two months to prepare your tax return before the usual due date of April 15. Plan when your return will begin and make sure it’s as early as possible so you can plan another session or two in case you need to spend time locating more documents or getting help.
In general, experts tax accountant Melbourne suggest that it is better to file tax returns early than late. The earlier you apply, the more likely you are to avoid tax-related identity theft, a crime that has been increasing. Also, if you expect a refund, you will get it sooner.
Decide How To File Your Tax Return
There are several options for preparing and filing your tax return. Learn about each one so you can choose the option that is right for you:
- File Tax Free: If your adjusted gross income (this is a specific tax term that basically represents your income minus certain tax deductions) is below a certain limit, the IRS has free tax preparation software that can make your tax return preparation easier with features that can help you determine any deductions or credits you may obtain.
- IRS Forms Online: If your adjusted gross income is higher than that limit, the IRS has electronic versions of the paper forms that will do the math for you, but they offer only a basic guide and will not give you the same kind of help in determining what deductions or credits you might have.
- Tax Preparation Software: If you want a little more guidance, you may pay a fee to use these online tools, which are available through a number of vendors. They will explain how to prepare your tax return and help you determine the deductions or credits for which you may be eligible.
- Tax Preparer: If you find that you need one-on-one help from an expert, you can go to a tax preparation agency or accountant.
- Make sure you work with someone you can trust. You will give this person access to a wealth of sensitive personal information, so choose a tax return accountant professional carefully. The IRS has a directory of verified tax preparers that can help you find one in your area. While this does not guarantee its reliability, it is a good place to start.