It’s the season to be prepared: tax season. During tax season, Americans across the country rush to file paperwork and find out if they’ll get a tax return or need to pay more taxes for the year.
When you’re unprepared, the process can be daunting. The only time most of us have seen more paperwork than what’s needed during tax season is when we purchased our homes. Don’t worry; with a bit of preparation, the process doesn’t have to be so convoluted.
What to Do to Prepare for Tax Return Season
Maintain Good Bookkeeping Practices
This is a process that never stops. Good bookkeeping practices mean we have a record of where money is coming from and where it’s going.
These practices include things like saving receipts for any expense you plan to write off, keeping track of healthcare expenses, and maintaining your records for at least three years – the average period of time auditors look into records.
Things You’ll Need to Have Handy When You File Your Taxes
-It helps to have a few things handy when it’s time to sit with a tax prep service and file the paperwork.
Identification (ID). It’s always a good idea to have your government-issued ID handy.
-Bank Account Information. You may receive a tax return at the end of each year, and you might it deposited directly into your bank accounts. Bank information, like account number and routing number, must be on the paperwork for that to happen. An easy way to have this information handy is to bring a voided check.
Income Documentation. It’s also important to have all W2s and/or 1099s handy when it’s time to file tax paperwork because income is a crucial part of the equation.
-Receipts. If you have any expenses to write off, it’s important to bring receipts to prove those expenses.
-Documents for Financial Gifts. Any financial gift from friends or family worth more than $16,000 in 2022 must be reported to the IRS. It’s important to bring any documentation surrounding these gifts when it’s time to file.
-Medical Insurance Form. Medical insurance premiums and other medical expenses can be written off. Moreover, there are tax perks for carrying medical insurance throughout the entire year. So, it’s best to have the medical insurance form handy to take advantage of those perks.
Set Up Tax Services Early
The deadline to file taxes is April 15th every year. Hundreds of millions of Americans rush to tax service providers in a short span of time every year. That makes access to tax preppers limited when it’s needed the most.
It’s best to avoid procrastinating and set up services with a tax service as soon as possible to avoid any possibility of filing late.
The Bottom Line
Taxes are an important part of developed economies, and they don’t have to be difficult. Being prepared for tax season takes the headache out of dealing with Uncle Sam.