Tax season is officially under way, and while filing your taxes may not be your definition of a fun time, the process is less painful if you’re prepared. Additionally, with the first significant reform of the tax code since 1986, it's more important than ever to have an organized system now – and in preparation for 2018.
To make filing as smooth as possible, get your paperwork in order before you start.
Obtain the Right Tax Form:
Make sure you have the right tax form for your individual situation. Many people will use the same one they used the previous year, but if your circumstances have changed, you may need to use a different form. The options for most employed individuals are the 1040EZ, the 1040A, and the 1040. To know which is right for you, visit the IRS website (where you may also download the appropriate form) at www.irs.gov; or visit a tax advisor.
Gather Personal Identification Information
Of course you will need to know your own Social Security Number, but you may need to know a few others as well. These numbers may include those of your spouse, children, childcare provider, or anyone to whom you pay alimony.
Gather Income Information
Your next task is to collect all of your income information. Depending on where you derived your income, you will need documents for:
A W-2 shows the amount of money you earned, money withheld for taxes, and any contributions you made to a 401(k) or retirement plan, medical accounts, and more. In other words, it’s your most important form. You’ll need one from each of your employers.
A 1095-A is for anyone who bought health insurance through a state or federal exchange. Using the information on the 1095-A, you can determine your tax credit amount for Form 8962. If you receive health coverage through your employer, you’ll receive a different form (1095-B or 1095-C). However, for 2017, you don’t need this form to file your taxes.
If you’re part of the “gig economy” (i.e., folks who juggle multiple part-time jobs to get by), or if you work a side job to supplement your full-time income, you’ll need a 1099-MISC. This form documents income or payments that you received over $600. It’s a staple tax form for freelancers and anyone who worked as a consultant.
If you haven’t received any tax paperwork, or if you think that you’re missing something, contact your employer right away.
Other earned income information that may be needed:
- Partnership, S-Corporation, and trust income
- Pensions and annuity income
- Unemployment compensation
- Rental income
- Social Security benefits
- State and local tax refunds
- Earnings from the sale of your home or real estate
- Investment income (interest and dividends, proceeds from broker transactions, and retirement plan distributions)
- Alimony received
- Jury duty pay
- Gambling, prizes, and lottery winnings
- Scholarships and fellowships
Collect Deduction Information
If you plan to itemize your deductions, make sure you account for everything. Depending on what you are able to deduct, you’ll need to have records for outgoing expenditures as:
- Mortgage interest
- Real estate taxes
- IRA or other retirement plan contributions
- Miscellaneous investment related expenses (such as safe deposit box fees if used to store investment documents and computer depreciation if used to track assets)
- Early investment withdrawal penalties
- Medical/dental bills
- Moving costs
- Charitable donations and volunteer expenses
- Auto loans and leases for vehicles used for business
- Student loan interest
- Unreimbursed job-related expenses (travel, uniforms, union dues, education)
- Job-hunting expenses
- Child care expenses
- Adoption expenses
- Tax return preparation expenses
Looking into the future, according to CNN, the new tax measure, which you’ll be using for your 2018 tax filings, could shake up life for millions of Americans.
Tax rates within brackets have changed, and the standard deduction has doubled. The personal exemption will disappear, and the child tax credit has been expanded. College 529 savings accounts can be used to send a child to schools besides universities, but alimony payments are no longer deductible for the person who writes the checks.
While you gather your tax information to file for 2017, it’ll be a smart move to start notating what items you’ll need from employers and others to file for next year. Creating a checklist, or starting a filing system, will help you stay organized and will keep you from “hunting and gathering” down the line.
While changes are on the horizon for taxpayers nationwide, you can trust that Nusenda Credit Union puts our members first. We can help you maneuver through life’s financial milestones, so that you can get back to doing the things that are most important to you. Make an appointment today at any of our Nusenda branches statewide; or visit Member Benefits, where you’ll find a number of webinars, workshops, financial calculators, and free financial counseling.
Content is this article provided by BALANCE. Additional information provided by CNN.