Though the deadline to file taxes this year isn't until April 15, it pays to carve out some time in January to tackle your return. While the IRS won't be accepting returns until the end of the month, now's a good time to start getting your 2018 taxes in order -- because if you don't, you might regret it later on.
You need an early start this year
Unless your taxes tend to be really simple, you might encounter some hiccups this year when you file your return. That's because this is the first year the massive 2018 tax overhaul will come into play on filers' returns, making things more complicated than usual.
For example, back when the standard deduction was much lower, filers generally knew whether they'd be itemizing on their returns or not. But since the standard deduction nearly doubled for 2018, more filers are likely to find themselves in that gray area this year.
If you're self-employed, you might struggle even more to complete your return. Changes to the tax code have altered what you can and cannot deduct, making it even more cumbersome to determine your total tax obligation.
And that's why you should really give yourself a little extra time to work on your taxes this year. Though employers technically have until January 31 to issue W-2s and 1099s (forms you'll need to file your taxes), many will manage to send them out much sooner. As you're waiting for those tax forms, you should make a point of compiling the documents you need to file your return. These might include:
- Mortgage interest statements
- Receipts for business expenses
- Receipts for healthcare spending
- Receipts for charitable contributions
- Records of any estimated tax payments you made during the year
- Records of child care expenses paid
- Student loan interest statements
Many of the above will come into play if you wind up itemizing on your return. Not only that, but knowing the numbers will help you determine whether it pays to itemize in the first place.
For example, say you're a single tax filer with $8,000 in deductible mortgage interest and $2,000 in charitable contributions. Since the standard deduction for the 2018 tax year is $12,000 for single filers, itemizing won't pay if those are your only two deductions. But you won't know that until you look at your records and run the numbers.
Another thing: Changes to withholding tables meant that many workers received more money in their paychecks in 2018. If that happened to you (meaning you had less tax withheld), but you also earned money from outside sources like interest income or investments, you might actually owe the IRS money, even if you've typically gotten a refund in years past. And the sooner you figure out what your tax bill looks like, the sooner you can start figuring out how to come up with that money in time for the April 15 deadline to avoid penalties for being late.
Though most of us would rather not think about taxes as early as January, in reality, now's the time to get moving on them. The IRS recently announced that it will begin accepting tax returns on January 28, so if you manage to have yours ready by then, you might as well file it. If you owe money on your taxes, filing early won't push up the date they're due -- you'll still get until April 15 to pay the IRS what you owe. And if you end up getting a refund, it'll come your way that much sooner if you file early.
The Motley Fool has a disclosure policy.