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Getting Your Tax preparation Right to Avoid Penalties

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Many Americans now use paid preparers to submit their tax returns. It helps to be ready when it is time to file taxes for the entire process to be successful. Once you choose the tax preparation individual or firm, you will have to provide them with information. They can take the information from you directly or through a questionnaire that they will request you to answer. It takes time to get this information ready, and a few tips might help you organize what the preparer requires.

Getting and Verifying Your Information

Your returns information should be ready by the end of January, and you need to take time and ensure that the information corresponds to your records. Some forms are standard, although you need to ensure you have everything you need. If you are employed, you need a W-2 form. For people that got Social Security benefits, form SSA-1099. You also need other 1099 forms for reporting income such as cancellation of debt which requires form 1099-c. For dividends, you need 1099-D, and for interest, 1099-INT is required. Independent contractors that receive non-employee compensation will need 1099-MISC. Form 1095-A is used for health coverage, 1098 forms are for mortgage interest and for student loan interests, you need to use 1098-E. For tuition payments, 1098-T is used, and W-2G forms are used to report gambling winnings. You use schedule K-1 forms to file entities in which you have the ownership interest. You can get assistance for tax preparation from your preparer if you’re not sure which forms you need.

Receipts and Charitable Organizations

When your receipts are organized, it will be easy to evaluate your annual spending correctly. This will make it easier for you to file returns. You need to know which receipts to keep and which ones to discard as this will enhance tax refunds and reduce the amount of paperwork needed for tax purposes. You also need to put together records for donations you have made to charity. You must have an acknowledgment when you made such contributions, or you will not be able to account for donations made to charity.

Get Information on Tax Changes 

It helps to know if any recent changes have occurred in tax laws or you might find that you do not qualify for exemptions. Some changes have taken place in the individual healthcare market, changes in the individual mandate, and exemptions from the mandate. Other changes have occurred on home equity loans and personal exemptions and child tax credit. Knowing what changes have taken place will help you prepare adequately. You also need to have your personal information ready and then decide whether you need a filing extension in order to avoid penalties for late filing. You should also make a decision on what to do if you expect a tax refund.

If you make time to prepare early for your tax refunds, you will have a smooth experience with tax returns. Tax preparation helps you because you save money even when you hire a professional to do the filing on your behalf.