Tax season is back, and for most people, it comes with plenty of anxiety and frustration. But tax time doesn’t have to be this way. There are some simple actions you can take to streamline the process and get ahead of the game.
Now is the time to begin preparing for tax season, and if you follow the tips in this article, this could be the year you start making sound financial decisions that will pay major dividends for you and your family.
Find Your Past Tax Returns
One way to ensure a successful tax season is to find and use your returns from recent years. Especially if you haven’t seen any significant life changes, returns from past years an accelerate the tax prep process and supply a good chunk of the information you need.
If you’re using an online service to complete your taxes, the service may be able to use your previous returns to automatically fill in most of the information on the required forms. If you’re filing by hand or getting help from a professional preparer, you can still use your old returns to cross-reference basic information and make sure your return is up-to-date.
Previous returns can also help you remember important deductions and other actions that affected your taxes. For instance, if you made small donations to charities in the past year, you can probably deduct those donations if you have a receipt or canceled check from the organization. Double-check previous returns to see if they jog your memory about any small donations or other deduction-eligible expenses you make on an annual basis.
Gather All Pertinent Documents and Information
One of the keys to preparing your taxes successfully and filing on time is making sure you have every relevant document and all the supplementary information that supports those documents.
First, check your receipts and consider whether it would be better to itemize deductions or take the standard deduction. (This can be a little tricky, so give us a call if you have any questions or need any help.) In addition to gathering all work-related receipts (fuel, supplies, marketing materials, etc.), be sure to compile and complete the following documents:
- Your W-2, if you were employed last year
- Form SSA-1099, if you received Social Security benefits
- Miscellaneous 1099s for cancellation of debt, dividends, interest, and non-employee compensation
- Form 1095-A, if you purchased health coverage from a government exchange
- Form 1098, if you owned a home that accrued mortgage interest or if you paid tuition or interest on student loans
Note that this is not an exhaustive list. Please contact our offices for more information about specific forms and documentation that you might need based on your employment status or other circumstances.
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Learn About Updates to Tax Laws
Given the recent tax reform legislation, many people are understandably confused and concerned about how the new law will affect their filing status. This year, the impact shouldn’t be too great, but there are still several changes you should know about.
There are still seven tax brackets, but several of the rates have changed. For instance, the previous 15% tax bracket for taxpayers who file as “married filing jointly,” which applied to combined household income thresholds of $18,651–$75,900, is now set at 12% for combined household income thresholds of $19,051–$77,400.
Similarly, the previous 28% bracket threshold for taxpayers who filed as “single,” which applied to individuals earning $91,901-191,650, has been changed to 24% and now applies to individuals who earned between $82,501 and $157,500.
Here is a simple table explaining the updated brackets and thresholds.
|Rate||Single||Married Filing Jointly|
|10%||Up to $9,525||Up to $19,050|
|37%||Over $500,000||Over $600,000|
Deductions and Exemptions
The new tax law also significantly changed standard deductions and exemptions. The standard deduction for a couple filing jointly will leap from $13,000 to $24,000. For single filers, that number will increase from $6,500 to $12,000. However, the new law eliminates the personal exemption, which was previously set at $4,150.
For individuals and families with children, the law increases the Child Tax Credit from $1,000 to $2,000, and $1,400 of that amount is refundable. Also, whereas the Child Tax Credit used to begin phasing out at $110,000 for couples, it now extends to $400,000 ($200,000 for single filers).
The new law also makes several changes to itemized deductions. For instance, medical expenses were previously deductible past 10%, but that figure has been lowered to 7.5%. Similarly, mortgage interest is now deductible for loans up to $750,000, which is down from $1 million. Lastly, state and local taxes are now capped at $10,000.
Decide Whether to File an Extension and How to Handle Your Potential Refund
If you need more time to complete this year’s tax returns, you have the option of requesting an extension that will give you until October 15, 2019 to file. Doing so will let you avoid a failure-to-file penalty, but you’ll still need to estimate your taxes owed and pay them on time to avoid late-payment penalties.
If you’re expecting a refund, there are several options to receive it:
- Apply any amount toward estimated tax payments for next year’s return
- Have the funds deposited directly into your bank account
- Allocate any amount to accounts of your choosing, including:
- Education Savings Account
- S. Savings Bonds
Deferring or investing your refund can be somewhat complicated, so please reach out to S.H. Block Tax Services with any questions.
S.H. Block Tax Services Is Here to Help With All Your Tax Needs
Tax season can be stressful, especially for individuals and business owners with complicated returns. Thankfully, you don’t have to make it through tax time alone. If you are having difficulties filing your current tax returns or are overwhelmed with daunting tax issues from previous years, S.H. Block Tax Services is here to help.
Our staff has decades of experience helping individuals file their returns successfully and get back into compliance with the State of Maryland. We have an A+ rating with the Better Business Bureau, and we offer free consultations to discuss your current tax status and develop an effective action plan based on your unique circumstances. To get help, please contact us today by completing this brief form or calling our offices directly at (410) 793-1231.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.