Boxelder’s team of CPAs and licensed tax professionals boasts decades of experience helping individuals file their returns and minimize their tax bills. We can work with you to:
- Conduct an assessment of your tax situation,
- Establish rapport and develop a relationship which is essential to providing the best service possible,
- Develop a customized tax “game plan,”
- Anticipate and adjust to changes in tax laws, and
- Identify and create opportunities through strategic tax planning.
How Do I Do My Taxes?
The tax filing process for individuals can often seem overly complex and intimidating. But it doesn’t need to be. If you break the process down into just a few easy steps, you can go a long way toward simplifying the tax filing process.
Gather All Necessary Forms
The first step in the tax filing process is gathering and preparing all the income forms you will need. This step will differ for every individual because not every person generates income the same way.
If you’re an employee, for instance, then you will receive a W-2. If you’ve received more than $600 as an independent contractor, then you will receive a 1099-MISC. If you’ve received income from dividends, then you will receive a 1099-DIV.
Most of these should be received by January 31, though some might arrive a couple of weeks later.
Standard Deduction vs. Itemized Deductions
The next step in the process is to determine whether you will take the standard deduction or itemize your deductions. The standard deduction is a fixed amount that any taxpayer can claim (in 2020, $12,400 for single filers, and $24,800 for joint filers), while itemized deductions allow you to break down your expenses. This takes some number-crunching, but it’s worth it to see which will save you more.
While there are lots of potential deductions, here’s a quick rundown of some popular ones. Make sure you have documentation for each before you file:
- Retirement account contributions – You can deduct contributions to a traditional IRA or self-employed retirement account. Just be sure to stay within the contribution limits.
- Educational expenses – Students can claim a deduction for tuition and fees they paid, as well as for interest paid on a student loan. The IRS won’t accept your deduction claim without Form 1098-T, which shows your education transactions. Form 1098-E provides details on your student loan.
- Medical and dental bills – Medical costs could provide tax savings, but only if they total more than 7.5 percent of your adjusted gross income.
- Property taxes and mortgage interest – If your mortgage payment includes an amount escrowed for property taxes, that will be included on the Form 1098 your lender sends you. That document will also show how much home loan interest you can claim on Schedule A.
- Charitable donations – To ensure your generosity pays off at tax time, keep your receipts for charitable donations. The IRS could disallow your claim if you don’t provide verification.
- Classroom expenses – If you’re a school teacher or other eligible educator, you can deduct up to $250 spent on classroom supplies.
- Work-related education expenses – You may be able to deduct the expense of work-related education from your taxes if you itemize. This can include items such as tuition, books, supplies, lab fees, transportation and travel costs, and even the cost of research. Know that to claim this deduction, your costs must have been required by your employer and had to have been used to maintain or improve your job skills.
Gather Supporting Documentation
Unfortunately, the IRS does not operate on the honor system. Though it can take some time to gather, proper documentation is the key to successfully claiming deductions.
This step will look different depending on which deduction route you chose. If you itemized your deductions, you will need to provide supporting evidence to substantiate them. If you claim the home office deduction, for instance, you’ll likely need to provide documentation verifying regarding things such as the size of your office or the amount of your internet bill.
File an Extension if Necessary
If you need more time to gather everything, you can request an extension to October 15 for filing your tax return.
However, you’ll still have to estimate the amount of tax you owe and pay that amount by the regular April 15 deadline to avoid penalties. This makes intuitive sense: if the IRS allowed taxpayers to delay payments, it would be flooded with extension requests.
Plan for a Refund or Additional Payment
The final step is to prepare for whatever outcome will follow when you file your return. Will you receive a refund? Or will you owe money?
If you expect a tax refund, you have several options for how it’s handled:
- The government can send you a check or deposit the refund directly into your checking or savings account.
- You can apply some or all of the refund toward next year’s taxes.
- You can contribute some or all of your refund to certain types of accounts (IRAs, health savings accounts, education savings accounts, etc.).
If you owe money, then you will need to determine how your payment will be made.
The IRS provides various payment options in order to give taxpayers flexibility. For instance, you may decide to pursue an installment plan, which will let you make smaller periodic payments, as opposed to a single, lump-sum payment. Visit our Tax Relief department for more information on IRS payment options.
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The team at Boxelder Consulting can provide expert guidance throughout every step of the tax filing process. Individual taxpayers rarely achieve the optimal outcome by going solo; in most cases, having an expert’s assistance will place you in the best possible position. Get in touch today and we can get started on developing the right strategy for you.