While the April 15th tax deadline is still months away, you don’t want to wait until the last minute to file. Taking the time to get organized before you prepare your return can ensure that you’re taking advantage of every available deduction and credit, reporting your income accurately and eliminating room for potential error. The following checklist outlines the most important pieces of information you’ll need when planning your tax filing.
Personal Information
You can’t file your taxes without including relevant personal information for everyone included on your return. You’ll need Social Security numbers and dates of birth for yourself, your spouse and your dependents, if applicable. If you got married and changed your name, you’ll need to make sure that your information has been updated with the Social Security Administration. If you moved last year, make sure you update your address with anyone who may be sending you tax forms, including previous or current employers, state and federal tax agencies, brokerage firms and clients if you’re self-employed. You’ll also want to have your bank account information ready if you plan to have your refund direct deposited.
Income Records
Once you’ve got your personal information organized, the next step is getting all of your income statements together. This may include W-2 forms, 1099 forms for interest or dividends earned, self-employment income records, records of alimony payments you’ve received, Social Security benefits, unemployment benefit statements, retirement account distribution statements, profit/loss statements if you own rental property and records for scholarship payments or gambling winnings. If you had any debts that were completely or partially forgiven, you may have to claim amounts of $600 or more as income unless an exclusion or exception applies. You’ll also need to gather this information for your spouse if you’re married filing jointly.
Adjustments to Income
There are certain expenses that the IRS allows you to claim as an adjustment against your income, which can potentially reduce your tax liability. When you’re going over your expenses for the year, consider whether you can take advantage of any of the following adjustments:
- Contributions to an IRA
- Contributions to a Keogh, SEP, SIMPLE IRA or other self-employed pension plan
- Any alimony you paid
- Moving expenses
- Contributions to a Medical Savings Account
- Student loan interest you paid
- Credits for energy efficient home improvements
- Insurance premiums paid as a result of being self-employed
- Educator expenses
All of these expenses can be claimed as above-the-line deductions, regardless of whether or not you itemize. Just make sure you’re keeping receipts, statements or other records to show what you’ve paid.
Claiming Deductions and Credits
Tax deductions reduce your taxable income while tax credits can be offset against the amount you owe. Your eligibility to claim certain deductions or credits generally depends on your income, family size and whether or not you itemize. Some of the most common deductions include a deduction for mortgage interest and points paid, the tuition and fees deduction for education expenses, deductions for unreimbursed business expenses, deductions for charitable donations and deductions for out-of-pocket medical and/or dental expenses.
There are also a number of tax credits available, including the Earned Income Credit for low-income taxpayers, the Child Tax Credit for families with children, the Child and Dependent Care Credit for working families that pay childcare expenses and the Adoption Tax Credit for adoptive families. If you pay qualified education expenses for yourself or a qualifying student, you can also claim the American Opportunity Tax Credit, which has been extended through 2017. If you plan to claim any of these deductions or credits, you’ll need to make sure that you have the proper documentation, which may include receipts, pay stubs, cancelled checks, bank account statements, medical bills, tuition bills or childcare records.
Filing your taxes doesn’t have to be hassle and getting an early start can eliminate some of the stress. Investing a few hours of time to get your paperwork together could yield a significant return in terms of your refund.
