Tax Time Is Officially Here
With the calendar moving to February, it's officially tax season. Whether you are anticipating a refund or dreading the thought of making another payment, the following suggestions may prove helpful as you proceed with preparing and submitting your tax forms.
What are the best resources to use when I have tax questions?
The Internal Revenue Service (IRS) makes a tremendous amount of resources available for taxpayers to understand how to file their taxes each year. The first stop should often be the IRS Publication 17: Your Federal Income Tax for Individuals. Whether or not you decide to hire a tax professional to prepare your return, you should always be aware of what is included on your tax return (and what might need to be included). Publication 17 will help you understand whether you are required to file a tax return and when you are required to do so. It will also include an outline of new tax law changes for the filing year, as well as an overview of income to report and eligible adjustments, deductions, and credits. When in doubt about your individual tax situation, consider seeking advice from a tax professional.
Should I hire a preparer or file on my own? What if I have questions?
The decision to seek the assistance of a tax professional for the preparation of your federal or state tax return is a personal choice. While there are numerous tools available to assist you in filing your own return, a credentialed tax professional can help you with more complicated issues that may be more difficult to work through. When seeking a tax professional, you ideally want to work with an enrolled agent (EA), certified public accountant (CPA), or attorney. All of these professionals have unlimited representation rights before the IRS, meaning that they may represent you on matters including audits, payment/collection issues, and appeals.
What should I do to ensure I'm prepared for tax season?
No matter if you decide to work with a tax professional or file your own return, ensure you are well-prepared with the following:
Organize Your Tax Records – Ensure you have a recordkeeping system to track all relevant tax information. Recordkeeping can be accomplished with either a physical or digital file. Most wage and other income forms should annually be received by January 31st. At the latest, you'll receive 1099 forms associated with investment accounts by February 15th. Check to see that you have a well-organized system in place for tracking that you have received all applicable forms and that they are ready to be filed when needed.
Organize Your Deduction Documentation – This is especially applicable if you itemize your deduction. Ensure that you organize your invoices, receipts, and statements associated with expense deductions such as charitable contributions, taxes paid, medical and dental expenses paid, etc.
Access Your Prior Year Return – You will likely need to reference your prior-year tax return information to file your current return. If you do not have a paper or digital copy of your prior-year tax return, you can request a transcript from the IRS through your tax account.
With a bit of organization and knowledge, you'll be well on your way to successfully getting your 2021 tax return filed.