Tis the season to start gathering tax data for a successful return
Tax season is right around the corner, which can be good news or bad news depending on the individual. For those accustomed to getting a tax return, that annual financial windfall is welcomed with open arms. On the other hand, those used to a tax bill every April are far less enthusiastic when tax time rolls around.
With tax season on the horizon once again, it's time to start preparing to file a return. The following guide can help individuals get their tax materials in order, whether they're filing themselves or enlisting the help of a tax professional.
To file a tax return, individuals will need their own social security number, as well as that of anyone else they might be helping or listing on their own return. This includes a spouse and any dependents. If preparing someone else's tax return, be sure to inform them this information will be needed to avoid any unnecessary delays.
For those men and women who will be enlisting a professional to prepare their return, bring all of this information to the meeting. Tax season is especially busy for accountants and tax prep professionals, so it might be difficult to secure another appointment should you forget to bring all of the necessary information.
It's easy to get confused when attempting to file a tax return.For men and women who visit the local library for their filing information, that table full of documents can be intimidating. What's more, the Internal Revenue Service Web site can be difficult to navigate for those who have not visited it in the past.
No document is more necessary than a W-2, which employers must provide by the end of January. Men and women will get one from each of their employers, so those who work multiple jobs, even part-time jobs, will need a W-2 for each job they've worked in the past 12 months. Additional documents that can be necessary might pertain to investment income, business or farming income, alimony received, and forms for state and local income tax refunds.
A good rule of thumb to avoid getting lost in the documents is to start as early as possible the more extensive or complicated the employment and income history may be. For example, men and women with one job and no outside income should be able to file quickly and easily. The more extensive a person's investment portfolio or the more jobs a person has, the more difficult it will likely be to file the return. So start early if things are complicated.
The government gives men and women all sorts of credits that reduce the amount of the income taxed. These include homebuyer credits, IRA contributions, green energy credits, or student loan interest.
*Homebuyer credits: A properly executed settlement statement must be attached to a return, and men and women should keep in mind the IRS now has greater authority to deny homebuyer credits.
*IRA contributions: A year-end account summary or bank statement is often all that's needed.
*Green energy credits. Among the items potentially eligible for residential energy credits are insulation, energy efficient exterior windows, energy efficient HVAC appliances, and solar hot water heaters. Of course, receipts will be necessary for those attempting to earn a credit for any of these items.
*Student loan interest: A year-end loan statement should be received sometime in January.