2018 has witnessed some changes to the tax rules, so you need to start planning your taxes accordingly. Whether you file your taxes on your own or you hire an accountant, it is important to organize your receipts, checks, and other information. Check out the following tips that will come in handy as prepare for the 2018 tax season.
Keep the Documents Ready
As you need all the documents related to your revenue and expenses it is good to have a file for putting everything together in one place. Having everything organized in one place will save you a lot of trouble later. Following are the list of documents and forms that you would be needing to file your taxes.
1 – Documents Related to Revenue
W2- A tax form that contains information on the wages paid to the employees and the taxes deducted from them.
1099 – A tax form used to report the income other than salaries and wages. They include income from self-employment, retirement distribution, investments etc.
K-1- k1 form is for people who have an interest in a partnership or an S corporation and contains information about the profits and losses from their business.
2 – Documents Related to Expenses
Form 1098- A form that contains the details about the interest generated and the expenses paid on the mortgage in a financial year
Form 5498- This form comprises the contributions that you made to an Individual Retirement Arrangement in the previous tax year.
Documentation on other expenses include bank statements, cancelled check, check registers, and credit card statements from where one can calculate the expenses on entertainment, travel, or business.
3 – Documents Related to Personal Information
You need documentation related to your name, date of birth, and Social Security Number. You also need your bank account number and bank routing number so that if you have any refunds, they can be directly deposited to your bank account.
Take Time to Learn the New Laws
You should know the changes in the tax laws and how these changes impact your taxes. Every year in February you get your first pay check and this is time to review if there are any modifications. Accordingly, you need to see if there will be any changes to your W-4 form that is used to specify your tax situation to the employer.
Know Your Filing Status
Tax filing also depends on whether you are single or married, and if you have any dependents. You may be married but may you choose to file the income tax separately from your spouse, in case you do not want to share the tax liability.
If you are married and filing the income tax jointly, it gives you a lot of tax benefits. If you are single but living with a dependent for more than six months then you have the option of filing the tax as the head of the household, which can give you further benefits. For a widow or a widower with dependent children there is a separate category. So, it is important for you to consider your marital status before filing the income tax as you can accordingly avail the benefits in the particular category.
Review the Taxes Filed in Previous Years
As you file taxes every year there may be no considerable variations. So, maintain a record of all the previous taxes that you have filed. Your previous tax return can easily remind you areas you overlooked the last time, and any balances that need to be carried forward to this year.
If you wait until the last minute to file your taxes it creates a lot of stress. So, it is good to start the process at the time you get your W2 from the employer so that preparing for the 2018 tax season is easy.