Let’s face it, even under the best of circumstances, tax preparation and tax filing can make one feel instantly overwhelmed. As a result, it’s not uncommon for people to put off thinking about their taxes until the very last minute possible. While this might temporarily relieve stress at the moment, it’s bound to catch up with you eventually.
Oftentimes, it can be helpful to familiarize yourself with tax preparation tips and guides, even if you’ve been a taxpaying citizen for many years now. Knowledge is power, as they say, and it’s never too soon to start thinking about taxes, especially when it comes to getting organized and prepared.
In anticipation of the 2024 tax season, we’ve crafted an ultimate guide for how best to prepare. In this post, we’ll touch on a series of tips and tricks to help ensure that this upcoming tax season is your most stressful to date.
Step #1- Assess Your Current Status and Document Any Changes
A good place to start when beginning the process of tax preparation is to determine your filing status. Has it changed throughout the past year? It’s important to make note of this information as your status (single individual, married couple, head of household) will determine how you file your taxes.
Once you’ve determined your status, a good next step will be to gather all necessary documentation. To make the aforementioned step easier, we recommend finding a space where you can safely keep all of your documents, whether you prefer to store this information digitally or on paper. This will help prevent you from having to search through multiple locations when it comes time to gather the required information.
For further organization, designate one specific spot at the beginning of the new tax year to store your documents. From there on out, dispense all tax-related documents in that one location. That way, when you do inevitably have to reach for your tax documentation, you won’t stress, knowing it’s all been stored in one location.
One last note on filing status. If for some reason your tax filing status has changed, for instance, let’s say you got married since the last time you filed taxes, make sure that you understand what new documentation might be expected from you. Throughout the year, if you think a certain document might be important for tax purposes, but aren’t completely sure, we recommend keeping it anyway. In the case of taxes, it is always better to be safe than sorry.
Step #2- Verify That You Have the Correct Tax Form
In the United States, tax filers use specific forms depending on the nature of their profession (W-2, 1099’s). There are differences in these forms. For example, a W-2 will show you your annual wages and the taxes automatically withheld from your paycheck. On the contrary, independent contractors and freelancers will receive a form that shows the income they acquired throughout the year.
If you’ve changed jobs or careers in the past tax year, verify this information ahead of time, so that come the beginning of tax season you’re not blindsided by having to learn the ropes of a new form. Doing so in advance will help you iron out any kinks ahead of time.
Step #3 Inventory Any Applicable Life Changes
As previously discussed, certain life events like getting a new job, or getting married, may change the trajectory of your tax filing procedure. However, there are a handful of events and circumstances that can also impact how you file taxes including marriage, divorce, children, and dependents.
Marriage doesn’t necessarily mean that you automatically have to file jointly, but there can be definite benefits and drawbacks to doing so. In the case that you’re newly divorced (within the past tax year) you may now need to allocate child support and alimony. Make sure you know what you’re on the hook for, as the sooner you can figure out that information, the better. Finally, if you have children, you might just qualify for a child tax credit, dependent care credit, or education credit. If this is all uncharted territory for you, enlisting the help of a tax professional can bring clarity and understanding.
Step #4 Handling Multiple Income Sources
Regardless of where the money is coming from, you need to track your income and expenses accurately, particularly if you have freelance work, side hustles, or investments to account for.
To do so you can use tools like accounting software or spreadsheets. Furthermore, you also need to understand which income sources are subject to taxes and which ones are not. For example, if you’re a self-employed contractor, you may get a 1099-MISC form from your clients instead of a W-2 form.
Please note, that if you are self-employed, you’ll also be required to provide employment taxes (Social Security and Medicare) on your net earnings.
Step #5 Get your Deduction Ducks in a Row
When it comes to taxes, it’s not all doom and gloom. You might find that you’re eligible for certain deductions. For example, if you work from home, you may qualify for a home office deduction. However, like all deductions, eligibility will be determined by you meeting the proper requirements and limitations. For instance, you must use a portion of your home regularly and exclusively for your business. Furthermore, that deduction is only limited to your business’s net income. In summation, always read the fine print.
Other deductions that may be available to you include (but are not limited to) self-employment expenses, medical expenses, charitable contributions, and investment-related expenses.
Step #6 Enlist in Software or Hire a Tax Professional
Nowadays, technology has made it so that filing taxes is simpler than ever before. With that said there are still a lot of i’s to dot and t’s to cross. This is why you should go with your gut feeling and get the necessary help that you need. While hiring a reputable tax professional is usually beneficial in the vast majority of cases, it can be particularly helpful if your life and tax filing situation has changed dramatically. This will help ensure that you aren’t missing any important information including possible deductions and write-offs.
If you are local to the greater Charlotte NC area look no further than McGrant Tax & Bookkeeping. As a business that has been successfully operating for going on 27 years, we have established ourselves as a firm that Charlotte’s personal and professional tax filers have trusted and relied on for decades. To learn more about the ways that we can help you with your tax preparation in Charlotte NC, feel free to contact us today at any of our two locations or visit our website https://mcgranttax.com and book an online or physical appointment.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her attorney, business advisor, or tax advisor concerning matters referenced in this post. McGrant Tax and Bookkeeping assumes no liability for actions taken in reliance upon the information contained herein.
