Now that the New Year is well underway, it’s time to start thinking about and preparing for tax filing season. As you gather your documents, here are just a few things you can do before, during and after filing that may make the overall process easier.
Gather all necessary year-end documents. The forms you need from your employers and financial institutions typically start to arrive by mail or online in January. Once you receive these documents, take time to review them to ensure all the information is accurate. If corrections are needed, you’ll want to reach out to the appropriate organization immediately to obtain a corrected document. In addition,  if you’re depositing your refund directly into a bank account, you’ll need your account number and routing number. If you don’t have a bank account set up, check out the options Centris has available. For additional information, TurboTax provides a tax preparation checklist you can reference as you gather your documents.
Review your previous federal and state returns. The information from previous tax documents can help you start your 2022 tax return as some of the entries will likely be the same. This will also help you determine if you’ll need to make changes in how you file or what documents you’ll need especially if you experienced important life events such as getting married or divorced, having a child, attending school or changing jobs.
File using standard deduction or itemized deductions. If you claim the standard deduction, you’ll be using the flat amount that’s determined by the IRS based on your filing status. You’ll simply enter the available standard deduction amount that’s on your 1040 form. Itemized deductions on the other hand are deductible expenses from the year, which include medical expenses, state and local taxes, mortgage interest and charitable deductions. If you have enough itemized deductions and they are greater than the standard deduction available for your filing status, it can reduce the amount of taxes you owe or in some cases, give you a bigger tax refund. If you are itemizing deductions, you’ll need to make sure you have the appropriate documentation to back it up (receipts, bank statements, medical bills, tax forms).
Decide who will prepare and file your taxes. There are several programs and softwares available online from reputable companies that can make filing taxes at home a little simpler. If you’ve had major changes in your life that could potentially complicate things, for example, you started your own business, you got married/divorced or had a child, you may want to look at hiring a Certified Public Accountant or tax professional to help you prepare and file. Don’t make this decision too late as it could impact finding a reputable source who can help you before the April 18, 2022 filing deadline.
Protect yourself from tax scams and frauds. This time of year, many people start getting phone calls, text messages and emails from entities that are claiming to be the IRS or the U.S. Treasury. The IRS only corresponds with people via U.S. Mail, unless you go into litigation. If you decide to work with a tax professional, make sure they are well-credentialed. Don’t try to find a tax preparer who promises to get you a bigger refund. The IRS website can help you find registered tax preparers in your area to help you avoid this type of scam. Setting up a direct deposit of your refund with the IRS is another safeguard. If you owe money, be sure you’re sending it through IRS Direct Pay. For more great tips on how to protect yourself against fraud or scams, visit the Centris Fraud Protection page on our website.
Think about your long-term income. Now’s a great time to look at what you’re setting aside for retirement. The money you put into an employer-sponsored 401(k), 403(b) or other tax-deferred retirement accounts are not taxed until you withdraw it. Now could be a great time to consider increasing your contributions. If you don’t have a retirement account set up, consider starting one to help you invest in your future. There are a lot of options available so be sure to find one that fits your needs and puts you on the right savings path.
When it comes to filing taxes, there’s a lot to consider. For more tips and help understanding some of the basics when it comes to taxes and filing, check out our Centris Financial Wellness Center!
