Read this before you do your taxes
Many Americans look to get an early start on their taxes in order to get their refunds as quickly as possible. But if you try to get your tax returns prepared and filed without knowing some key information, you can end up wasting time and going through the burdensome task of amending your taxes later on. Here are a few questions to ask yourself before you do your taxes.
1. Do you have all the forms you'll need?
By now, you should have gotten your W-2 forms from your employer, and most 1099s should be available by late January to mid-February. Yet some forms come later than that, and in some situations, the companies responsible for sending you your tax forms aren't as on the ball as you are. If that's the case, jumping the gun can result in your making difficult corrections, or even starting all over if you get an unanticipated tax form in the mail during or after you've prepared your return.
You can avoid trouble by looking at all the tax forms you got last year and seeing if you're missing any relating to this year's tax season. In some cases, you won't get the same form because the tax issue involved a one-time event. Also, if you've changed jobs or financial providers, you might get multiple forms, or alternatively, not receive a form you got last year. If you can't account for a form you expected to get, then be careful in starting your preparation, and definitely think twice before you file.
2. Are you aware of any major tax law changes?
It's critical to know about any big changes in the tax laws that have taken effect over the past year. Otherwise, you won't understand when your taxes don't work out the same way they have in the past, or you'll miss out on key tax breaks that could have reduced your tax bill.
For 2016, the biggest potential tax law change affects those who claim the Earned Income Tax Credit or the Additional Child Tax Credit. Beginning this year, the IRS isn't allowed to send out a refund to taxpayers who claim either of these two credits until Feb. 15. That shouldn't stop you from filing your return whenever it's ready, but it does mean that you might not get your refund as quickly as those who don't claim those credits. Given how important the credits are for taxpayers who claim them, it's not worth it for most people to give them up just to avoid any possible refund delay.
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3. Will you need help with your taxes?
Many people choose not to try to prepare their taxes on their own, and there's a variety of help available. You can always pay a professional accountant or tax preparer, but there are also some free resources, such as the Volunteer Income Tax Assistance program offered through the IRS.
If you want help, the key is not to wait to get things lined up. You should make sure you have all the necessary documents you'll need to get the help you're seeking, but keep in mind that the VITA program is very popular and typically has fixed dates on which volunteers are willing to help. Similarly, tax professionals often have their schedules fill up, especially as the tax filing deadline approaches. Get an appointment lined up and know how you'll get your taxes done, and that will put you on schedule for a successful tax season.
4. Do you want to file electronically?
Closely related to the question of getting help on your taxes is whether you expect to file your returns electronically. The benefits of e-filing include faster processing, more accurate information on your return, and quicker refunds. Some preparers, including volunteers with the VITA program, offer electronic filing as part of their tax preparation packages. However, others charge additional fees for e-filing, so it pays to know upfront what your provider's terms are.
Even if you prepare your taxes yourself, there are sources to help you file electronically. IRS Free File is a service that lets many taxpayers use convenient e-filing. Most tax preparation software offers electronic filing options, as well.
It's smart to get an early start on your taxes. But before you file, make sure you've done everything correctly so you won't get an unpleasant late surprise from the IRS. By asking these four questions, you'll be in better shape to get through your tax preparation as painlessly as possible.