Most of us don't enjoy doing our taxes, but for some folks, the process of filing a return can be downright anxiety-inducing. And this year, Americans have just a bit more to worry about. That's because this season is the first in which the recent tax overhaul will play out on tax returns. With that in mind, here are a few steps you can take to make the current tax season less stressful.
1. Get started early
Though taxes aren't due this year until April 15, getting started on yours ahead of time could make for a much smoother process. The sooner you start working on your taxes, the sooner you'll realize whether you're missing key documents or are confused about rules you need clarified to submit an accurate return. Furthermore, if you're expecting a refund this year, you'll get it sooner by filing your taxes early. And if you have reason to believe you'll owe the IRS money this year, the sooner you lock in that figure, the sooner you'll be able to devise a plan for coming up with that cash.
2. Make a list of key documents you need, and track its progress
There are certain important documents you'll need for tax-filing purposes, and forgetting about some of them could result in an inaccurate return. First, if you're a salaried employee, you'll need your W-2 listing your annual wages and withheld taxes. Employers are required to send out W-2s by Jan. 31, so be on the lookout for yours if you haven't gotten it already.
Next, if you're a freelance employee, or earned interest or dividend income last year, keep your eyes peeled for your 1099 forms, which will list your income for the year in each category. Keep in mind that you'll get a separate 1099 from each company you worked for that paid you $600 or more last year. Like W-2s, 1099s must be sent out by Jan. 31, so if you don't have yours by mid-February, be sure to follow up.
There are other items you'll need if you're planning to itemize on your taxes this year, which leads to the next point...
3. Figure out whether you'll be itemizing
In previous years, an estimated 70% of Americans took the standard deduction instead of itemizing on their returns because it resulted in a higher level of tax savings. This year, however, an even larger percentage of filers might wind up going that route. That's because the standard deduction jumped from $6,350 for single tax filers in 2017 to a whopping $12,000 in 2018. Married couples filing jointly got a similar boost -- the standard deduction rose from $12,700 in 2017 to $24,000 in 2018.
It pays to determine early on in the season whether you'll be taking the standard deduction versus itemizing, because if you're going the latter route, you're going to need a lot more documentation. For example, you'll need a mortgage interest statement to figure out how much to write off, your property tax bills, records of charitable contributions, and medical expense records, among others. For several of these, you won't get an official form, but rather, you'll have to go through your personal records to see how much you paid. For example, while you should get a mortgage interest statement from your lender, it'll be on you to add up your own medical bills and charitable donations.
If you realize early on that itemizing won't make sense this year, then you'll have less documentation to procure. But if you're convinced that you'll still itemize, then it pays to start gathering your paperwork sooner rather than later.
4. Decide whether you're able to file your taxes solo
If your tax situation isn't particularly complicated (say, you're taking the standard deduction and calling it a day), then there's really no reason you can't file your taxes by yourself -- especially if you file electronically, since today's software is designed to help you steer clear of mistakes. On the other hand, if you're planning to itemize, and you're confused about the new tax laws, then it might make sense to hire a tax preparer to avoid botching your return.
Now tax preparers tend to be pretty busy during tax season, and this year, they're likely to be even more inundated, since many will be navigating the new rules themselves. Therefore, the sooner you determine whether you need outside help, the more likely you'll be to find someone with availability before the tax deadline.
Let's face it: Taxes are far from fun. At the same time, they don't have to be painful. Follow these tips, and with any luck, you'll survive the 2019 tax season with your sanity well intact.
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