Preparing your taxes can be stressful, challenging work without using the right tools. These steps should help you reduce your paperwork significantly.
Preparing your taxes isn’t as difficult as many people make it out to be.
People typically dread filing taxes because it takes a long time and requires a lot of paperwork. While the process is tiresome, you must do everything you can to ensure your taxes are filed properly and efficiently. If filing taxes on your own sounds intimidating, you now have the option of using online video chat technology which allows you to get tax advice from a credentialed income tax preparer from your home in Oakland, Philadelphia, Atlanta, or anywhere else in the United States.
With a tax checklist, you’ll know what information you need for taxes and how you can save money on them. As you go throughout the tax year, you can reflect on the list to make sure you’re doing everything right. Fortunately, we’ve put together a list of tax prep advice to save you time!
Here are 6 steps to reduce the paperwork when doing taxes.
Personal Info That You’ll Need
The first thing on your tax prep checklist that you’ll need to do is know your personal information. When it comes to filing taxes, it’s best to know your last year’s taxes and how much you received on your return. While they aren’t necessary to file taxes, it’ll make the process easier because you’ll already know what documents to use.
You’ll also need to know the Social Security numbers for yourself and anyone else that you’re filing for. If you have a spouse and dependents, you’ll need their SSNs.
Gather Documents Related to Your Income
Keeping track of the money you’ve earned throughout the tax year will help you immensely as you must know the exact amount to file taxes. If you’re employed by someone, you should receive a W-2 form by January 31 that outlines your income.
Those that are self-employed and paid through services like PayPal can use a 1099 form. Providing that you’ve made a sufficient amount of money, PayPal will automatically produce a 1099 form for you at the end of the tax year.
However, you’ll need to document everything manually if you can’t acquire either of these forms. You can use the likes of bank statements and receipts for taxes to see how much you’ve made. Using the best receipt scanner will let you upload your receipts to your computer to make tracking expenses easier.
Tax deductions (or write-offs) are often overlooked by people when they’re filing taxes because they’re unsure of what they mean. A tax deduction lets you reduce your taxable income, resulting in you having to pay lesser on taxes.
The best part about tax deductions is that you can get them in a variety of ways. For example, you can get a tax deduction for putting money into a retirement account or donating money to a charity. The government sees these as legitimate ways to invest in yourself and give back to others, so they won’t tax the money used.
If you’re self-employed, you’ll most likely have many more tax write-offs than most people because of the things that you purchase for work. If you were an independent plumber, all of the equipment and materials will count as deductions.
Keep in mind that you’ll need to have documentation on everything to prevent you from filing the taxes improperly. Even if you’d only save a few hundred dollars, it’s worth keeping track of everything.
Look Into Tax Credits
Similar to tax deductions, tax credits are meant to make let you pay lesser on taxes. However, they’re different in that they reduce how much you owe in taxes instead of reducing your taxable income. Just like deductions, you’ll need proper documentation to ensure you can get a tax credit.
Out of all the popular tax deductions and credits, one of the most common is the Child Tax Credit. This lets taxpayers get a tax credit of up to $2,000 for every child dependent that they have. Those that have adopted children can also get this.
You can also look into credit for retiring contributions, such as the Saver’s Credit. Those that contribute to 401(k) and other employer-sponsored retirement plans are more than likely to be eligible for the credit.
Don’t Wait Until Last Minute
A solid piece of tax prep advice is to not wait until the last minute to start gathering documents and filing taxes. Filling out forms and gathering the documents will take a lot of time, so it’s best to not wait if you’d like to avoid having problems with your taxes.
Make the process simpler by documenting everything throughout the year. This will prevent you from coming up with the wrong numbers, which could lead you to owe the government money. You can dedicate a space in your desk to tax-related documents, but also try to keep digital copies.
Consider Hiring an Accountant
Aside from keeping track of everything, the hardest part about filing taxes is sitting down and crunching the numbers. Without knowing what you’re doing, there’s a good chance you’ll fill out the wrong information.
Fortunately, you can work with an accountant to have them do everything for you. They’ll take your documents and figure out which forms you need, then they’ll calculate everything to come up with the correct numbers.
Most accountants charge anywhere between $100-200 per hour for their services, but they don’t take too long to file taxes. Start browsing the internet to find an affordable accountant to help you if you want to avoid making any mistakes.
Start Preparing Your Taxes Today
After reading this article, you now know all of the essential steps to take to reduce paperwork and make filing taxes simpler. Although some people will need to work with an accountant, you’ll have all of the info you need to start preparing your taxes and avoid taking up too much time.
Check out our other articles to learn more about personal finance!