ELLY GRIMM
• Leader & Times
Tax season is officially under way, and while some people have already gotten their taxes done, many people are still making their way through the work.
One of the major decisions to make during tax time, according to Bankrate.com, is who will prepare everything.
“If you had major changes in your life – maybe you got married or divorced, started your own business or had to claim unemployment benefits – your taxes will be more complicated. As a result, you might need to hire a CPA or other tax professional to prepare and file your taxes,” Bankrate.com noted. “Just don’t wait until the calendar flips to April to make that decision because it could end up costing you. Many tax professionals will charge more as the filing deadline closes in. Or you could find yourself scrambling to find someone who’s not too busy to help you. However, if you’re not comfortable doing your own taxes and can’t afford to go to a CPA or a tax giant such as H&R Block, there are options that won’t cost you a cent. Free File Alliance is a coalition of tax software companies that partner with the IRS to help U.S. taxpayers e-file their returns. Your adjusted gross income cannot exceed $72,000 a year to qualify for the service. The Volunteer Income Tax Assistance program (VITA) uses IRS-certified volunteers to offer free basic tax preparation and e-filing to people who earn less than $57,000 a year, people who are disabled or whose English is limited.”
Another important task, according to the IRS, is to make sure you have all necessary documents.
“The deadline for submitting Form 1040, U.S. Individual Income Tax Return, or 1040-SR, U.S. Tax Return for Seniors, is April 15. To avoid mistakes and potential processing delays, taxpayers should refrain from filing until they have received all necessary tax documents,” the IRS noted. “Taxpayers should always carefully review documents for inaccuracies or missing information. They should immediately contact their employer or payer to request a correction if issues arise. The IRS also recommends taxpayers create an IRS Online Account, which provides secure access to their tax information, including payment history, tax records and other key information. Maintaining digitally organized tax documents can streamline the preparation of a complete and accurate tax return and may help identify overlooked deductions or credits. Taxpayers who have an individual taxpayer identification number or ITIN may need to renew it if it has expired. The IRS can accept a tax return with an expiring or expired ITIN, but there may be processing delays.”
The IRS also noted there are updates to Additional Child Tax Credit for tax year 2024 to keep in mind.
“The maximum Additional Child Tax Credit (ACTC) amount has increased to $1,700 for each qualifying child,” the IRS noted. “Bona fide residents of Puerto Rico are no longer required to have three or more qualifying children to be eligible to claim the ACTC. Bona fide residents of Puerto Rico may be eligible to claim the ACTC if they have one or more qualifying children. The IRS cannot issue refunds before mid-February 2025 for returns that properly claim the ACTC. This time frame applies to the entire refund, not just the portion associated with the ACTC.”
Investopedia also recommends gathering all necessary receipts.
“The receipts you'll need to provide depend on whether you itemize your deductions or claim the standard deduction. You'll want to choose whichever produces the bigger write-off, but the only way to know for sure is to add up your itemized deductions and compare the result with your standard deduction,” Investopedia noted. “Make sure you look for receipts for medical costs not covered by insurance or reimbursed by any other health plan (such as a flexible spending account (FSA) or an HSA), property taxes, and investment-related expenses. These are all subject to limits, but if they're substantial enough, it may be worth your while to itemize. If you itemize your deductions, you'll also need to collect any backup you have for charitable contributions. For example, donations of $250 or more require a written acknowledgment from the charity stating the amount of your gift and that you did not receive anything (other than perhaps a token item) in return. If you don't have such an acknowledgment, contact the charity and request it. If you have business income and expenses to report on a Schedule C form, you will need to share your books and records, such as QuickBooks or any other accounting system, receipts for expenses, and relevant bank and credit card statements.”
Bankrate also gave some recommendations regarding retirement accounts.
“If you’ve been stingy about funding your employer-sponsored 401(k), 403(b) or other tax-deferred retirement account, do yourself a favor and increase your contributions. The money you put in these accounts reduces your taxable income for the year, which reduces your tax bill. It isn’t taxed until you withdraw it,” Bankrate noted. “Many experts encourage people to contribute as much as possible to their health savings account (HSA), assuming they have a high-deductible health plan and are eligible. These accounts are triple tax-advantaged on the federal level, meaning you get an above-the-line deduction for contributing, and that growth in these accounts as well as withdrawals are tax-free if used for qualified health expenses. Additionally, employers often have a matching contribution for these accounts with no vesting schedule, meaning the employer contributions are always your money.”
Bankrate also noted it is important to be on the lookout for scams this time of year.
“As tax season approaches, many people start getting phone calls, emails and text messages from entities claiming to be the IRS. These are scams,” Bankrate noted. “The IRS Web site has a list of registered tax preparers to help people avoid dishonest ‘professionals.’ Direct deposit is another safeguard. Set up direct deposit with the IRS if you expect a refund; if you owe money, be sure to send it through IRS Direct Pay. Taxpayers who don’t file returns and owe taxes, or who file but don’t pay taxes on time are risking serious penalties. The IRS can seize assets if necessary. If the IRS has been sending you letters because it found an error on your return or claims you owe back taxes, respond in writing – and don’t delay.”
“Whether you do your own taxes or hire someone else to handle the task, organizing your records in advance will save you time and, in the case of a paid preparer, money,” Investopedia noted. “The earlier you start, the more smoothly it should go, and the sooner you'll have put the process behind you for another year.”
