Any time you're tackling an important responsibility, making a checklist can be essential to ensuring no important detail gets overlooked. When you're talking about preparing your taxes, drafting a to-do list can mean the difference between a painless filing experience and a protracted exercise in testing your stamina. It can also mean a disparity of hundreds or even thousands of dollars, depending on just how thorough you are.
Your checklist may be a little different from everyone else's but, generally speaking, there are some critical items you should be scratching off as you look ahead to filing day. The more comprehensive your inventory, the more assured you can be that you're making the most of your return. You can also mitigate the likelihood of unwanted complications with the IRS by planning ahead.
Typically, prior to rolling up your sleeves for your annual filing duty, you first need a complete list of income statements. These include W2's from your employer and 1099's for any side work you took advantage of last year. But you may also receive 1099's for other types of revenue. For instance, if you earned some money from gambling winnings, this will need to be reported on your return.
Similarly, if you had a debt forgiven from a line of credit, this too is taxable income. Failing to report these revenue streams in addition to your wages can create a disparity and, ultimately, a tax debt when the IRS reviews your return. Don't forget, third parties who provided your income - such as your employer - report this information to the IRS. Make sure you have all the necessary revenue information before starting on your return.
It's a mistake to assume that you don't qualify for certain deductions and tax credits. Further, it's a presumption that can cost you precious dollars come tax time. Once you have your income information in hand and you've begun to estimate your liability (or refund), you can then delve into how to turn the results in your favor. This begins with first determining whether you're going to itemize or take the standard deduction.
Your deduction decision comes down to what's going to benefit you the most and what supporting documentation you've retained. If you failed to keep receipts for deductible expenses, you shouldn't attempt to write them off on your return. Alternatively, if you've been meticulous in your documentation and qualify for the intended itemizations, you should determine whether the difference is greater than if you took the standard deduction. Taking the time with this step can either curb your liability or mean more refund money in your pocket.
There's no shame in admitting that you're unsure exactly how to file, or what credits and deductions are available to you. If you're in the dark on how to proceed, or you think you're not taking full advantage of tax season, consult with a licensed tax professional. If you've been comprehensive in your checklist endeavors, such a consultation should go quickly. Your tax professional will have an immediate idea of how best to serve you and keep your money where it belongs - in your wallet.
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