5 Tax Tips to Kick Off The New Year
As 2022 comes to end, it’s time to start packing up the holiday decorations and get ready for tax season. Soon, you’ll be receiving your W2s and 1099s, as well as many other important tax forms. To ensure your tax preparation goes smoothly, we’ve compiled a short list of tax tips to kick off the New Year and help you get ready to file.
January Tax Tips – Before You File
Once the iconic New Year’s Eve ball drops, it’s time to get rolling. You’ll want to start organizing and gathering everything you need to prepare your taxes.
1. Organize Your Tax Records
Although organizing your tax records won’t likely result in you owing less money, it does make completing your tax return much easier. Be sure to download our Individual Tax Prep Checklist so you can easily identify the documents you’ll need. This will include but is not limited to:
- A copy of last year’s tax return
- Income statements
- Gambling winnings & losses
- State and local taxes
- Homeowner or rental information
- Medical bills and receipts
- Education expenses
- Charitable donations
- Childcare expenses
- Retirement expenses
If you can’t locate your Form W-2G for gambling winnings, you can request a copy from any casinos or gambling businesses you frequented. We also recommend getting a win-loss statement, especially if you plan to itemize. For other missing receipts or invoices, reach out to the specific business for assistance. You can also check with your bank or credit card company.
2. Gather Necessary Tax Forms
Next, you’ll want to determine which tax forms you’ll need when preparing your return. You can download federal tax forms by going to the Forms, Instructions & Publications page at IRS.gov. For state tax forms, visit your state’s Department of Revenue website. Better yet, if you use a tax program, the forms will already be included. Just answer the questions and the program will determine which you’ll need to submit.
3. Consider Itemizing Deductions
Another thing to consider is whether you’ll itemize or take the standard deduction. Since the standard deduction nearly doubled in 2018, the majority of taxpayers no longer itemize. This, however, doesn’t mean it’s not worth your time to play around with the numbers to see if it will benefit you.
If you own a home, had expensive medical procedures, generously donated to charity, or you’re self-employed, itemizing may be a better choice. Just make sure that your qualified expenses exceed the standard deduction for your filing status.
Other New Year Tax Filing Tips
In addition to your suggested January tax prep tasks, these tax tips will help you stay out of trouble with the IRS.
4. Request a Filing Extension, If Needed
If you’re worried that you won’t be able to file by the deadline date, request a tax extension as soon as possible. A tax extension gives you an additional six months to prepare and file your return. Just make sure you submit your request before the original filing deadline to avoid potential penalties.
To get an extension, you’ll need to submit Form 4868 by mail or online. You can also request an extension when making a payment to the IRS.
5. File and Pay on Time
Although an extension gives you additional to file, you will still need to pay any taxes owed by the April deadline. Failure to do so will result in failure-to-pay penalties and interest being added to your tax bill. If you don’t request an extension in time, you may also be hit with a failure-to-file penalty.
To ensure you’re not paying Uncle Sam any more than needed, get a head start on your tax prep and plan to submit your taxes well ahead of the filing deadline.
Don’t Be Afraid to Ask For Help!
Tax season is a very stressful time of year. Although there are many good tax programs available to assist you, it can still be confusing if you have a situation that is a little outside of the norm. Working with a tax professional can not only help ease your mind but also limit potential mistakes. Don’t be afraid to ask for help if you need it. At MoneySolver, we offer affordable tax preparation services. To see if we’re the right fit for you, just call 855-476-6920 for a free, confidential consultation today!