Finally, tax season is upon us! I love this time of year, where I wait for my tax forms to come in, estimate my refund (or how much I’ll owe), and plan out the next year. I get a clear look at how we did the past year and can compare it to previous years to see how we stack up. I use TurboTax, and it lets me start my tax filing with partial information (which I did yesterday) and enter my tax info as I receive it.
As we’ve been through before, there’s no point in trying to cheat on your taxes. Eventually, you’ll be caught and will have to undergo an audit – you could pay back taxes, interest, and penalties and could even face jail time. The IRS has several checks and balances in place which makes it harder for you to pull the wool over their eyes, so it’s not even worth trying.
That being said, there are tax deduction you can and should take if you’re eligible. A good rule of thumb is to have a consultation with a tax expert at least once so that you can be made aware of what you can and can’t claim. From there, you can read up about upcoming changes, but in my experience, using tax filing software does a great job of walking you through the whole process and helping you take advantage of what’s appropriate for your situation.
Preparing For Your Tax Return
Tax season never truly ends. You should be preparing for tax season year round, and that starts with having a tax filing system. We just bought a filing system for taxes and other important documents, and it’s great to have one place to store documents that you likely won’t look at regularly, but need to know where they are. If you do go through an audit, you’ll have your tax forms in one place. And if you don’t, you’ll be all set to start filing your taxes.
The more proof you have, the more deductions you’ll be able to claim. If you have business mileage (for example, if you’re an Uber driver), you’ll need to have records of the miles you drove come spring-time so that you can claim those miles as a tax deduction.
Finally, having a filing system makes cleaning up very easy, too. You should keep most tax forms for 3 years from the date you file, so on April 15th, 2015, I will be throwing away everything related to tax year 2011. By keeping each year’s form in a different folder, I don’t have to sift through the entire pile of tax forms looking for something specific. The filing system we have now is WAY better than the old way of sticking everything tax-related into a single drawer.
The Most Important Forms
When you file, you take all your information and out comes a Form 1040, which is what you file with the IRS. What goes into these forms? Let’s start with the two most common forms you may receive.
If you have a full-time job, you will likely receive a W-2 from your employer. This lists your wages, the amount of federal, state, social security, and medicare taxes withheld, along with some other important information.
If you are a contractor, you will likely receive a 1099 form, which contains much of the same information (in this case, you probably don’t have any tax withheld and will have to send the government your share of taxes manually).
These forms are sent directly to the IRS by the employer, and they will send you a copy to help file your taxes. Since these are the most important forms, make sure that there are no mistakes. If there have been any errors made, report to your H.R. department immediately so that they can send you an amended form.
The reason that this is so important is that the IRS has sophisticated systems that compare what you have entered as income, etc. against what your employer has entered. If they don’t match, your return will probably be flagged and you will be required to explain the discrepancies. Don’t count on your last pay stub matching up perfectly to your W-2 or you could run into problems later when you file.
Okay, now we look at the addendums. Consider your Form 1040 as a summary of your overall tax situation.
You now need to have a look at the various addendums that you may need to submit in addition to the primary form. These range from Schedule A – Itemized Deductions through to Schedule 8812 – Child Tax Credit. A complete list of these supplementary forms can be seen by going through to the IRS website.
Prepare for Tax Season Now
If you don’t have one, create a filing system now. The key to getting your tax return right is simply to ensure that any information that you enter is completely correct and that you are able to produce evidence to back up any claims and deductions you’ve made. By having all your information in one place, you won’t lose an important piece of paper that could be the difference between a fat refund and owing taxes when you file.