Plan and prepare taxes for this year’s tax return with this helpful guide!
Prepare Taxes: Here’s What You Need to Know
1. Review Your 2017 Tax Return
If it’s not your first time, and you have previously filed for previous years’ taxes, you may have experienced troubles when preparing your tax returns. From your past experiences, determine which parts of the preparation are the most challenging. From there, you can choose the best possible ways to resolve the issues before this year’s filing.
2. Know Your Tax Filing Status
Your tax filing status plays a big role when preparing for your tax return. It determines your filing requirements, how much you owe in taxes, and whether you should expect possible refunds. From your filing status, you can also figure out the allowable deductions, exemptions, and credits you can claim.
3. Organize Your Documentations
Finding a way to organize your documentation, such as receipts and other important documents, greatly helps in saving a lot of time for the actual filing of returns. While the IRS does not require the submission of these documents, it will help you figure out the eligible expenses for deductions. As much as possible, keep all necessary documents so when the IRS flags you for an audit, you have all the documents ready.
4. Utilize Your Retirement Savings
One of the benefits of having retirement savings such as 401(k) or Traditional IRAs is the entitlement for a tax break. To take advantage of this benefit, you may consider contributing more to your retirement savings. An IRA retirement savings account allows you to defer paying income taxes on up to $5,500 annual contributions made to an individual retirement account. A 401(k) account, on the other hand, allows employees to defer income taxes on contributions on amounts of no more than $18,000.
5. Track Your Charitable Donations
When you have made some charitable donations, it entitles you to deduct the amount from your net income for the year. However, you can’t simply list them down and claim them as part of your deductions. You are required to show a written acknowledgment from the organization or the receiver of said donation, especially for donations made for amounts over $250. As for non-cash donations, you need a document stating the description of your donation including the fair market value of the item.
6. Plan for Estimated Taxes
Making estimated quarterly payments is more beneficial than you can ever imagine. By paying for estimated tax liabilities, it makes budgeting even easier for you, especially at the end of the year. Aside from spreading the tax burden over time, paying for estimated taxes can also help you avoid incurring any penalties.
The IRS requires an individual to make estimated tax payments when:
- It is expected that you owe at least $1,000 worth of taxes for the taxable year after deducting your credits and/or withholdings.
- It is expected that your withholding and credits total to be less than 90% of your current tax return or 100% of your last year’s tax return.
7. Learn Your Way Through the New Tax Rules
The Tax Cuts and Jobs Act or Tax Reform of 2018 has certainly created huge adjustments for all taxpayers. If you are not sure how the new tax rules will affect your situation, it is best to do your research now. You may also contact a tax expert so they can guide you through the adjustments, help you prepare taxes, and plan for new tax strategies to help you and your business.
One of the best ways to prepare taxes and plan for tax strategies is to keep yourself aware of the different tax rules. Early preparations not only bring convenience but also allow you to save some money. Make sure to keep these tips in mind to avoid being stressed out when preparing and filing your tax returns.
What is your best strategy to prepare taxes and file it early? Share your experience with us in the comments section below.
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