7 Tips for Early Tax Preparation

7 Tips for Early Tax Preparation

The reality is that most people stop thinking about their taxes once they have filed their tax return. The problem with not planning for your taxes is that tracing back your expenses might be a difficult task for the next tax season. Setting up a smart record keeping system is one thing to prepare for the tax season. Below are the top 7 tips to help you with early tax preparation.

Due Diligence

Gather information related on tax and health care issues change. Staying on top of the latest news on tax changes is really helpful as you might be able to find out how the tax changes will affect your tax return filing for the next year. So, subscribe to monthly newsletters or visit IRS’ website to find out about the latest tax law changes.

Itemize to Lower Taxes

You can claim a standard deduction on your tax return. Itemizing your deductions can help you lower your taxes. For instance, donating to charity can equate to tax savings. You can file for the Form 1040 for the Itemized Deductions to list all possible deductions on your taxes.

Double Check Your Information

An innocent typographical error on the tax form can cause problems during the filing of tax return. In most cases, people often tend to enter incorrect security numbers thus they have to redo the filing again. So, to save time and expedite the process, make sure that you double check your information.

Refer to Last Year’s Tax Forms

Looking over the previous year’s tax forms will help remind you of things that you might forget such as dividends, interest payments, and unusual deductions.  This will also help you determine which forms and documents that you need to prepare for next year’s tax season.

Get the Right Forms

Filing for tax returns can be confusing because there are so many paper works that need to be done. In most cases, W2 forms are usually required and are provided by the employer while a Form 1099 is needed to be filled out by anyone working as contractors with wages that didn’t have annual tax withholding. Getting the right forms saves you all the trouble of filing the wrong one.

Keep Tax Records Safe

Organize tax return as well as supporting documents together with your other tax documents in a safe place.  By organizing your tax records, you can easily find them in case you need a copy to apply for a financial aid or a home loan.  Keeping your tax records safe is also important as it will serve as your guide for the next year’s tax filing.

Be Proactive During Life-Changing Situations

Changes always happen in our lives and it is important to take note that these changes can also affect dollar amounts in your taxes. Getting married, buying a house, having a baby, and even the death of a loved one can result in changes to your taxes. When these events happen, your withholding tax will also be affected. Thus, you need to file an Employee’s Withholding Allowance Certificate or Form W-4 with your employer to implement the necessary tax changes.

Early tax preparation is very important so that filing for next year’s tax return is worry-free. You can also benefit from hiring professionals as they can help you jumpstart your tax planning. A good tax accountant can aid you in maximizing your refund while always playing by the rules stipulated in the ATO.

MKS&H can help with tax planning, tax returns preparation, audits, accounting services, consulting, and acquisition accounting. For more information click here.

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