Preparing for tax season can seem overwhelming, especially if you need to become more familiar with the process or have a lot of financial matters to sort through. Now more than ever, tax season is more and more stressful for new filers and veteran tax slayers alike. In a November news release, the IRS stated that "Refunds may be smaller in 2023," and that "Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no economic impact payments for 2022." The IRS recommends preparing for or beginning your filing sooner rather than later.
With a little organization and planning, you can make the process smoother and less stressful. Here are some steps you can take to prepare for tax season:
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Gather all of your tax documents: These might include W-2 forms from your employer, 1099 forms from any freelance or contract work you did, and any other documentation related to your income and deductions. It's essential to have all of these documents on hand before you start preparing your tax return. You'll need them to accurately report your income and claim any deductions or credits you're eligible for.
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Organize your documents: Once you have all of your tax documents, take some time to organize them. Create a file or folder for each document type, and label everything clearly. This will make it easier to find what you need when you're ready to start preparing your tax return.
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Determine your filing status: Your filing status will determine which tax forms you need to use and which credits and deductions you're eligible for. The five filing statuses are single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child. Make sure you choose the correct filing status for your situation.
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Understand your tax deductions and credits: There are many deductions and credits available to taxpayers, and it's crucial to understand which ones you're eligible for. Deductions reduce the amount of your income subject to tax, while credits directly reduce the amount of tax you owe. Some standard deductions include charitable contributions, mortgage interest, and business expenses. Some common credits include the Earned Income Tax Credit (EITC), the Child Tax Credit, and the American Opportunity Tax Credit (AOTC).
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Decide how you want to file your taxes: There are several options for filing your taxes, including doing it yourself using tax software or hiring a professional tax preparer. If you choose to do it yourself, ensure you have a good understanding of the tax laws and are comfortable preparing your return. If you need more confidence in your ability to do it yourself, consider hiring a tax preparer. Make sure you choose a reputable professional with experience preparing tax returns. Most online filing providers like TurboTax, TaxAct, and even the IRS themselves have free filing tools for taxpayers to use.
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Set aside some time to work on your taxes: Preparing your tax return can be time-consuming, so make sure you set aside enough time to focus on it. This might mean taking a few hours on the weekend or setting aside some time each evening. Whatever you do, try to avoid waiting until the last minute to start working on your taxes. This will only add to the stress and pressure you're already feeling.
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Keep good records: Good record-keeping is essential for tax preparation. Ensure you keep your tax documents and receipts organized throughout the year. This will make it much easier to prepare your tax return when the time comes.
By following these steps, you can better prepare for tax season and make the process less stressful. Start early, gather all necessary documents, understand your tax deductions and credits, and choose the best filing method. With a bit of planning, you can make tax season more manageable. Now, time to prep that filing; April 15th will come fast!
