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How to get ready for Tax sessions
Taxes can be a bit stressful because they require a lot of personal information that can seem daunting to gather in a short amount of time. Getting yourself prepared will alleviate stress and make you confident about filing your taxes correctly. A happy IRS always ensures you that you will get your tax refund. If you plan on having an accountant do your taxes then you will want to include your social security number is in the same folder as your other paperwork that you give to the accountant and always double check your tax form to make sure your social security number is correct. If a Social Security number for any person listed on your tax return is missing or incorrect then you may not get your refund back or the IRS could delay the process. If you have a spouse and you are filing jointly, then make sure you also include their social security number as well. An accountant files many peoples taxes so a mistake isn’t uncommon to happen. If you have dependents, don’t forget their ID numbers and if your dependents don’t have their number then contact the Social Security Administration immediately. If you plan on filing for the child care credit then you will also need to include the tax identification number of the business that takes care of any children while you are at work.
Collect the w-2 forms
Since you do get taxed on the money you make each year, you’ll be getting a form W-2 from your boss showing how much was earned, any taxes that were withheld and how much is taxable. If you have more than one job then you should get a form W-2 from each employer. If you’re an independent contractor then the company you worked for will send you a 1099-MISC form showing your gross earnings you made. Being self-employed can be a bit more tricky because you have to document all the receipts, mileage put on your car for business-related commutes, the equipment and supplies bought for your business, and the utility bills paid to keep your business going.
Get in touch with your financial institute
You should always check with your bank or credit union to see if the interest earned on your savings account is taxable. If it is, then you should get the statement from your account holder and get a 1099-INT form. The interest earnings are typically documented on that form. But if you have any connection to a stock or mutual fund then you should get the 1099-DIV form. You will need this form for any stock, mutual fund, or money market account. If you use a broker, then the reports on the proceeds from the brokers transactions will be sent to you on a 1099-B form. Hang on to your year-end financial statements so you can compare them to the final tax documents.
If you have a house or homes you are currently paying mortgage for then the tax on them is tax-deductible. Your lender will send you a 1098 form with the amount that is deductible. If you made an extra mortgage payment at the end of last year then make sure that the added interest payment is included in the amount that your lender has counted for. If you own a vacation home, the interest on that mortgage will be on a separate 1098 form and it will only count as a deductible. Mortgage interest is not limited to your primary residence so make sure you have all the correct forms if you have multiple mortgages. Also do not forget the interest you paid on a home equity loan. You can also claim real estate taxes as a tax deduction. Your lender will include the escrow amount on the 1098 form. Any state or local income taxes you paid can count as a deductible, so be sure to check your W-2 form for the amount and make sure you deduct those too. If you don’t own a house then you may still be able to deduct a personal property tax. Be sure to check if the state or county you currently live in charges a personal property tax. This tax is most often on autos, so if you are paying that make sure the tax collecting agency sends you a statement showing how much you paid so you can put it on your Schedule A.
Another good way to get rewarded during tax time is if you give cash to a qualified charity. If you donated $250 or more, you will need to get a note from the group that has acknowledged your gift. If the donation was smaller than you do not need a formal receipt but you will need either a canceled check, bank or credit card statement just in case the IRS has any questions. If you drop off any clothes or items to a local salvation army or collection center, you will need a receipt. But if the items are damaged or not in good condition then the IRS can deny the deductions that deem “minimal monetary value”. Which means that you can not donate trash and write it off. If you volunteer at a local facility you can deduct 14 cents per mile when you drove to help the group. You will need to document the mileage used on a calendar with the days you worked.
Knowing all of this information will help you be prepared. Keeping track of all your documents throughout the year and having all of your tax-related documents organized and easily accessible will help you realize immediately if you are missing anything or if you need to make a correction on your tax forms. Also it makes filing your taxes much easier and relieves you of the stress. Which saves you time and money.
The recommendations contained in this article are designed for informational purposes only. Essential Lending DBA Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.