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Bring out your box of receipts. Tax season begins today.
Eager taxpayers can start filing their 2019 tax returns on Monday, Jan. 27. The IRS expects it will receive more than 150 million returns.
People with elaborate returns can ask for a six-month extension to file, but they have until April 15 to pay 2019 taxes owed.
While it may be tempting to procrastinate — especially if you know you owe money — your tax professional would prefer you show up early with the appropriate documents.
“If you prepare everything else early, you’ll get your return handled much faster,” said Ed Zollars, CPA at Thomas, Zollars & Lynch in Phoenix.
“The earlier you can push it through, the better chance you will have for your return being smoothly prepared, versus ‘I’m sorry you have to go on extension because we don’t have the time to go through it,'” he said.
Here’s where to get started.
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The best way to make sure you’re not missing any of your necessary documents is to review last year’s tax return.
“By the end of this month, everything should be there,” said Cristina Gugilielmetti, a certified financial planner and owner of Future Perfect Planning in Brooklyn, New York. “Last year’s tax return is a good checklist for everything that you’ll need this year.”
Paperwork would include a Form W-2 that your employer must provide you, as well as your Form 1099-MISC from businesses that hired you as an independent contractor.
Ideally, freelancers and entrepreneurs should have been tracking their income and expenses throughout 2019, as well as paying quarterly estimated taxes.
If you made some money through gig economy work, you may end up getting a 1099-K, by the end of January. It would detail how much you received from debit and credit card transactions.
See below for a list of key documents.
Be aware that the IRS won’t penalize you for not having health insurance in 2019, but a handful of jurisdictions — Massachusetts, New Jersey and Washington, D.C. — will impose penalties if you went without coverage.
Watch out for a series of forms (Forms 1095-A, 1095-B and 1095-C) detailing whether you and your family members had coverage throughout the year. You’ll need them to file those state tax returns.
You may have to reach out to your human resources department or to your insurer directly to get this paperwork.
Finally, while procrastination is never a good idea, sometimes taxpayers have no choice.
For instance, a delayed 1099-B from your brokerage account could potentially hold up your filing plans.
Further, investors in partnerships generally have to wait until they get a Schedule K-1 from the entity. This document spells out the filer’s share of income, losses and dividends. These taxpayers tend to file for an extension.
Chasing a tax break
You can save a few dollars on your return if you’re willing to do a little bit of work.
Reach out to your child-care provider for a tally of the costs you paid, as well as the provider’s tax ID, to claim the dependent care tax credit.
See below for the forms you’ll need to claim different credits and deductions.
Further, those who donated to their favorite causes and wish to claim a charitable deduction must have the appropriate acknowledgement letters from the charities.
Remember, you must itemize on your tax return to deduct your donations.
The Tax Cuts and Jobs Act raised the bar on who will itemize, as you now must surpass the standard deduction of $12,200 for singles or $24,400 for married filing jointly to do so.
Either way, you won’t know if you qualify to take itemized deductions until you tally up your expenses.
“Get a central repository for everything that comes in the mail or a digital folder at your desktop for electronic forms that come in so they are all in one place,” said Guglielmetti.
“That’s the best way to start and it will get you most of the way there.”
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