Tax Time Is Coming!
We’re back to filing on April 15th, and now is the time to get your items organized for a smoother tax season. By taking the time to prepare, you can rest easier, feel less stressed, and ensure your taxes are prepared thoughtfully and thoroughly. Our friends at TurboTax® can also help ensure you get credit from every deduction you deserve.
At First United CU, we also offer you discounts on their tax preparation products. Learn more here.
Are You Ready?
To get started, TurboTax provides a comprehensive checklist of what tax items to collect. They recommend organizing the following items:
- Last year’s tax return
- Tax forms, including W2, 1099-MISC, 1099-INT, SSA-1099, and others
- 1098 forms
- Financial institution statements
- Receipts, canceled checks, insurance reimbursement information
- Medical or dental expenses
- Taxes you’ve already paid
- IRA contributions
- Charitable contributions
- Investment interest expenses
- Other tax deductions and credits
View more or for your free checklist, check out this page on the TurboTax site. They also have staff that can help answer your questions.
Tax Pitfalls To Avoid
Our friends at GreenPath Financial Wellness are another excellent resource when it comes to tax planning. Ultimately, you want to save time and money and eliminate any potential errors on your return.
First, we’d like to reiterate the importance of giving yourself plenty of time and keeping your documents organized. Also, have on-hand all your available resources. There are also numerous errors that taxpayers repeat every year you can avoid.
GreenPath offers this list of tax errors to watch for:
- Incorrect filing status.
- Social Security number(s) incorrect, missing or doesn’t match name(s).
- Incorrect or missing forms and schedules.
- Return not signed.
- Claiming ineligible dependents.
- Failing to claim tax credits (Child Tax Credit, Earned Income Credit, etc.) or figuring credits incorrectly.
- Failure to report and pay domestic payroll taxes (for example, if you are employing an in-home caregiver, nanny, etc.)
- Forgetting to claim income that’s not included on a Form W-2, Form 1099, or other return.
- Failing to figure out whether you’re liable for the Alternative Minimum Tax (AMT).
- Entering the wrong amount of taxable Social Security benefits.
- Mailing your return to the wrong address.
- Math errors.
- Not itemizing. The standard deduction used when itemizing is often more advantageous. The government estimates that more than 500,000 taxpayers using the EZ form could save money by itemizing.
It’s Easy To Avoid Errors!
It always pays to plan, be organized, and give yourself time — all these factors can help you reduce potential errors on your return, whether it’s inputting incorrect information or making simple math mistakes.
For a smoother return, consider this advice from GreenPath Financial Wellness:
- Double-check all figures. It’s easy to make mistakes with your calculations. For example, you could transpose a number ($54 vs. $45) or accidentally add or subtract a digit ($789 vs. $89).
- Look for missing or incorrect information. This includes signing your return and that your Social Security number is legible. If you want your return to be deposited directly into your credit union account, be sure your account information is accurate. Google or call for an institution’s information, including their routing number. (First United CU’s Routing Number is 272480775.)
- Don’t miss the deadline. April 15th is (typically) the deadline every year. If you do not file on time, you will have to pay extra interest and fees. The IRS charges interest from the date it is due until the time it is paid off and will tack on a late filing fee as well. If you need to file a six-month extension, you must file for it before April 15th. (Note that it is easy to file for an extension and well worth it if you believe you will miss the deadline.)
- Claim your tax deductions. These are expenses that lower your taxable income. The guidelines can change from year to year, so it’s important to understand the rules, but standard deductions include:
- Medical and dental expenses
- Business expenses
- Mortgage interest paid
- Education expenses
- Dependent children
- Don’t forget your tax credits. These are expenses that also reduce the taxes you owe and include:
- Homebuyer credit
- Energy credit
Tax credits can change annually. Visit www.irs.gov to see the latest information.
- Calculate exemptions due. These will increase or decrease your take-home pay based on your number of withholdings. (You can change these exemptions by filing a Form W-4 at work.) You may consider increasing your exemptions, which will reduce the amount of a potential tax refund and add more money to each paycheck. If you prefer not to owe on your taxes, be careful not to increase your exemptions too much.
- File using the correct forms. The forms can be confusing because there are often similar names for completely different forms (1040, 1040A, 1040EZ). Filing an incorrect form can delay your tax return’s processing or possibly cause you to miss out on potential tax breaks.
- File even if you can’t afford to pay. If you know you owe the government money and can’t afford to pay them, you still want to file a tax return. Missing the deadline will result in additional penalties and interest charges.
There are many variables to preparing your tax return — income, deductions, tax brackets, dependents, etc. That’s why many people choose to have a professional to prepare their taxes. But with a little preparation, you can feel confident in preparing your return.
For details, visit the IRS at www.irs.gov or talk to a tax professional for specific advice. We also encourage you to peruse both the TurboTax and GreenPath Financial Wellness educational sites for more tips.