IRS began accepting tax returns on January 31st, officially kicking off the 2014 tax season.
Here are some helpful tips to prepare for filing taxes this year.
Organize your paperwork
Proper reporting is the key to successful tax filing. It helps to have all the material at your fingertips because the IRS wants to know how much money you made last year so it can be taxed. You need to know what to put on your form 1040 to reduce your tax bill. Get your Form W-2 from your boss to show how much you earned, the taxable amount, and the withheld taxes. Independent contractors must get a Form 1099-MISC which shows the gross earnings. The key is to take your time and gather all necessary paperwork, receipts, forms, and checklists.
Check if you qualify to file for free
About 70% of taxpayers in the country may qualify for free federal tax filing. The IRS provides a free online tax filing service called the Free File Alliance, which can be used by anyone with an adjusted gross income of less than $58,000 a year.
Lower your taxable income by contributing to a tax advantaged account
You cannot make any more contributions to your 401(k) for 2013, but you still have other options like health savings accounts, IRAs, and SEP IRAs into which you can contribute up to the tax filing deadline of April 15, 2014. If you don’t have an account already, you can still open one to make the 2013 contribution.
Make sure that you put down the correct Social Security numbers
This is a common careless error. Double-check the Social Security numbers of everyone including you, your spouse and other dependents. Erroneous Social Security numbers may cause you to miss out on valuable credits and tax deductions.
Don’t forget about other assets that the IRS is interested in
Your salary isn’t the only earning that the taxman wants a piece of. If you’re saving money towards retirement or for your child’s college education, interest earned on the savings accounts is taxable. Get statements of each of the accounts and the official tax forms. The IRS will also need copies of the forms.
If you have invested in stocks or mutual funds, get a Form 1099-DIV for each stock and mutual fund account. You will also need to report the proceeds from broker transactions. Keep your year-end financial statements ready to compare with the official final tax documents.
Save time by E-filing with direct deposit
The earlier you file your taxes, the earlier you get your tax refund. If you want to expedite the process, forget paper and go digital. E-file your return with direct deposit to process your refund faster. E-filing will also prevent you from making common mistakes on tax returns.
Do you need professional help?
If your only source of income is from your salary, and you have a relatively simple financial life, you may be able to file your own taxes without much trouble. But if you have more complicated finances, or are simply not comfortable with numbers, consider consulting a certified public accountant.
Those above 60 years of age can get free help from volunteers of the Tax Counseling for the Elderly program. Anyone who makes less than $52,000 a year is also eligible for help from the IRS volunteer income tax assistance program.