Here’s what you need before you file!

The new year is upon us, which means tax season is right around the corner. To stay ahead, you might begin preparing and planning to file your taxes. If so, we have a tax season checklist to help you organize the documents you need to filing.

1. Your personal information

First things first, you’ll need the following personal information on hand in order to file your taxes. These items include, but aren’t limited to, your returns from last year, social security number, identity protection (IP) PIN (if you have one), and bank account numbers.

2. Gather income documents

Next, you’ll want to understand how much money you made in the previous calendar year. The most common income documents you’ll encounter include W-2 forms and 1099 forms. Employers are required to mail/issue your W-2 by January 31, and you should expect 1099 forms to arrive shortly after that. There are different types of 1099 forms depending on what type of income you’ve received (i.e., contract work, game show winnings, royalties, third party payments).

3. Understand deductions and gather documentation

A deduction can help reduce your taxable income and ultimately help lower your tax bill for the year. Make sure you have proper documentation for any of these in case you’re ever audited. Common deductions include retirement account contributions, educational expenses, medical bills, property taxes/mortgage interest, charitable donations, and more. When you’re ready to file your taxes, the IRS has a detailed resource list of deductions for individuals to be aware of. It's important to research and understand that some deductions only apply if you take the route of itemized deductions rather than the standard deduction.

4. Know your credits

Credits are very similar to deductions, but tend to hold more value to taxpayers. NerdWallet explains that “tax credits are offered on both the federal and state levels to incentivize certain actions, such as purchasing an electric vehicle, or to offset the cost of certain expenses (e.g., raising or adopting a child). To qualify for a tax credit, taxpayers usually must meet a strict set of criteria relevant to that credit.”

When you file your taxes, the common credits you’ll encounter will typically fall into five specific categories:

  • Those with kids
  • Those with a low-to-medium-income household
  • Those that invested in retirement/li>
  • Those pursuing an education
  • Those that have made green purchases

5. Know your payments

Finally, it’s time to include your payments. NerdWallet further explains that “estimated taxes are payments made to the IRS throughout the year on taxable income that is not subject to federal withholding.” In other words, these are payments not documented on your W-2 form. This mainly impacts freelancers, those that are self-employed, businesses, and some investors. This can also affect some workers when their tax liability is not fully covered by their withholdings.

As you prepare for tax season, consider filing early if you can! There are a few perks when you file sooner rather than later. And remember, April 15 is your deadline to file your taxes this year.
 

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