Preparing to File Your Tax Returns

Tax Returns

The deadline to file tax returns this year is April 17, 2018 unless an extension is filed which, when accepted, will provide an additional six months to get them completed. So what is the big deal about filing tax returns? If the information you need to provide is minimal, you are claiming the standard deduction, you do not own a business, and you do not have unusual income, or expenditures then your tax returns should be easy to file. The more your situation differs from the things stated in the last sentence the more complex they will be to prepare.

One of the first things you should do is decide if you will prepare your own taxes, or pay someone else to do them. If you are filing your own taxes do you use paper forms, or software? If you are using software you need to evaluate which one is best for you. There is a review you can access on Nerd Wallet that covers some of the more popular options (see it here): What about having someone else file your taxes for you? One thing to consider is your income and complexity. If you have a high income and complex issues then you should probably look for an experienced accounting firm who has certified public accountants specializing in tax issues to do the work. If your income is moderate, and your taxes are less complex you may want to choose a franchise that offers tax preparation help. One thing to keep in mind is the level of experience you feel comfortable with. More experience will sometimes cost more money, but may save you future headaches.

Whether you are preparing your own taxes, or having someone else prepare them for you there are many items you will need reference during the process. Some of those items to have close by are as follow:

  1. Social security numbers for you and everyone else included on the return. Although you should have your social security number memorized it is probable that you do not have all the others you need memorized.
  2. You should have copies of tax returns from last year, or if you are using the same company to file your returns this year then they should have them on file. Either way information from the previous year’s returns will be needed.
  3. W-2 forms from all employers. All W-2’s are required to be mailed by January 31 each year so you should have them available as you will need to use information from them for the income section of your returns.
  4. 1099 forms. If you performed work as an independent contractor you should have received this form mailed to you no later than January 31. This form will show the amount of money you were paid and you will include it in the income section of your returns. If the amount of money you received for work was below the threshold needed to generate this form then you should still claim the income.
  5. Investment income. You will need to list any investment income you received.
  6. Unemployment income – Surprisingly. unemployment income is taxable and must be included in your returns.
  7. Business income – If you own a business, or are a partner in a business you will have to provide your income information for that business.
  8. Other income – Income from rental properties, social security, gambling, prizes, etc. You will have to claim any of this type of income on your returns.
  9. Tax credits. Any legal tax credits can be used to offset income.
  10. Qualified IRA contributions can be used to offset income.
  11. Mortgage interest and student loan interest can be claimed to offset income.
  12. Medical savings account contributions can be claimed to offset income.
  13. Business expenses – Qualified business expenses should be included.
  14. Charitable contributions should be included.
  15. Childcare costs should be included.
  16. Medical expenses should be included.

There may be other items that should be included in this list specific to your tax filing needs. Getting the items needed together before preparing your tax returns will make your job easier and potentially more financially rewarding.