Part of human existence is the paying of taxes. In fact, it may even be perceived as something that is intertwined with the existence of human lives and the survival of every established government and monarchical kingdom. Paying taxes may already be burdensome, and it becomes more burdensome and challenging due to some complications in its entire preparation.
It was noted by the Internal Revenue Services that about 80 million taxpayers are dependent on tax professionals to prepare for their tax return each year. The reality is, even though you have already paid a tax preparer to do the job for you, you still need to take some preparatory measures to ensure that the tax return field replicates the true data and information that you have.
Steps in Tax Preparation
Previous Tax Return
Grab the previous tax return at all times. This way, you have a guide on those things that need to be prepared, and be assured that you will not be missing some important information.
Collate the receipts
check whether you have received all the things, forms that you need especially coming from your employers and other financial institutions.
The type of receipt you need entirely depends on the type of deductions you want to avail, whether it is an itemized deduction or standard deduction. The type of deduction that you will opt to have is primarily for getting a bigger write-off. You can only assess that after adding up your itemized deductions and have them compared to your standard deduction. For the single taxpayer, the standard deduction allowed last 2020 tax year is around $12,400, and it is $24,800 for the married couples filing jointly.
Preparing and Gathering of Documents
Some documents must have been gathered and prepared at the end of January, which is essential and needed to prepare the tax return. Tax documents from employer/s, brokerage firms, banks, and other business establishments of which you have conducted some business must properly be secured and gathered. Meticulously check the information that you have if it matches the information contained in those forms.
Check out these forms and make sure that the information contained in these forms matches your records;
Form W-2 is for a person that is gainfully employed. If you have received other income aside from employment, there are various 1099 forms that you must fill out to report the other income that you received. Form 1099-DIV is for you to filled out if you received dividends and interests, and it will be formed 1099-INT is for the compensation of the non-employee, which is being paid to the independent contractors. If you want to report the payment you have tendered for a mortgage payment, you must secure Form 1098. If you have some winnings in gambling, you must report through Form W-2G.
List your Personal Information
There is some vital information that must disclose specifically about personal data, such as your Social Security Number and as well as the Social Security Number of each dependent that you claim. It is also needed for you to jot down some information about some of the real properties that you own, the addresses of each property. If you sold a real property, you must also indicate the address, the date of which you bought and sold the property, the actual purchase price when you bought it, and its selling price when you sold it. It must also be stated the amount that you have received from the sale.
Properly Choose a Preparer
It is better to engage the services of a preparer, and you may solicit advice from advisors, lawyers, or even from your friends as to a good preparer. Before engaging the services of the preparer, you must check if the preparer has the Preparer Tax Identification Number or PTIN for brevity. The PTIN is an assurance that the preparer is legitimate and an authorized person to prepare the federal income tax returns.
Make also some inquiries about the preparer’s fees. Usually, the fee of the preparer entirely depends on the complexity of your tax return. There are firms that you should avoid, especially those that take a percentage on your tax refund.
If still, you cannot settle to which will be your preparer, you must then check the IRS website for it is on this site that you can view the IRS directory of preparers. You can search on this site for preparers based on his or her credentials and as well as the location.
Schedule an Appointment with your Chosen Preparer
The soonest that you can schedule an appointment with the best tax planning preparer, the sooner that you will be able to finish your tax return. If a tax refund is also being anticipated, you can also expect that you will also be able to receive it sooner.
Prolonging to meet the preparer will also connote that you will have a delay as to your tax refund, and worst you may not meet the deadline in filing the tax return and miss out on the privilege of lowering the tax bill by availing some deductible contributions to the health savings account or in the IRA.
Plan Ahead for Any Refund
There are various options that you can have if you are expecting a tax refund. Here are some of the options that you can have for a tax refund;
Apply It for Next Year Taxes
The tax refund can be applied to pay the taxes for the succeeding year.
Deposit The Amount
If you have a tax refund, expect that the government will send you a check for the payment of the refund, of which you may opt to have it deposited, or the government may directly deposit it to your savings or checking account.
Contribute It to Some of Your Accounts
If you have certain types of accounts, such as IRA’s, educational savings accounts, or health savings accounts, you can make use of the refund to contribute to your chosen account.