It may only be February but that leaves just two months until taxes are due and the earlier you get started the easier the process will be. Fortunately, there’s a lot of great advice out there in cyberspace to help you get started.
First of all, decide whether you’d like to work with an accountant or tax preparer or if you will be doing it yourself. There is a lot of great software out there to help if you choose to file taxes on your own and it’s definitely the cheaper option. Just make sure that you choose the best software for you. Start by reading reviews for tax software to help choose the best one for you. Some are cheaper, some easier to use and some provide very accessible human support, so make sure to decide what features are the most important for you individually before you start.
As you make these decisions be aware of scams. Suspect anyone who guarantees anything, such as the largest possible tax return. Some of these manage to live up to this guarantee by submitting false information that can get you into big legal trouble later. Also keep an eye out for emails that ask for personal information. The IRS will never initiate contact with taxpayers by email.
Although not actually scams, be wary of offers of Refund Anticipation Loans (RALS) from tax preparers. These are short term loans that allow you to spend your tax refund before you’ve gotten it. The interest rates can be astronomically high and they are based on an estimate of your refund. If your refund ends up being less than expected, you could easily end up owing the tax preparer money that you don’t have.
Once you’re prepared it’s time to get your papers in order. If you’re very responsible then you’ve been saving everything you might need since the beginning of the year. All receipts, earlier tax bills and any other tax bills you’ve gotten in the mail. This includes your W-2 forms, which your employer should have sent to you by January 31st.
If you’re feeling overwhelmed now that you’ve got all of your papers, there are apps to help. If you have a smartphone, search for apps that allow you to scan all of your receipts, documents and invoices and then sort, tag and format them. Some can even take that information and help you graph and track it. Once you’ve done it, keep the documents anyway, just in case.
Now it’s time to try to understand what deductions are available to you. You may be able to claim deductions if you or your dependents are in college or paying off student loans, or if you are helping to support aging parents or additional family members besides your own children. Doing some research ahead of time can be especially helpful if you own your own small business. Keep all receipts just in case, but be careful not to invite any IRS audits.