Tax prep: 3 things to help you get your return done on time

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The end of the year is often a time of reflection and hope. There’s the promise of who you could be, the things you could do and the type of life you could live.

 

Getting on top of filing your taxes, however, rarely makes it to the top of resolutions lists. But given how complicated and frustrating taxes can be, it’s a good idea — even if it isn’t quite as alluring as your other goals. Plus, you’ll be that much closer to a refund, which averages $3,651 for Americans who receive one.

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“It’s never too early to start preparing for filing your 2022 taxes,” says Matt Schulz, LendingTree chief credit analyst. “Even if you wait to file at the last minute for whatever reason, it still makes sense to get your ducks in a row early on. Life happens, and the last thing you want is to scramble.”

 

Here are a few tips to help you prepare for tax time.

3 tips to get your taxes done on time

No. 1: Update your address

If you’ve moved this year (or will soon), contact your employer to make sure it has your new address. That way, there won’t be a slowdown in getting your W-2 or 1099 forms, and you’ll be able to get your taxes done much faster. After all, tax forms tend to have highly sensitive personal details, such as your Social Security number. It’s worth double-checking — even if you’ve set up mail forwarding.

 

Your company’s human resources department should be able to help. For context, employers must provide all income forms by Feb. 1, as required by the IRS. (If possible, set a quick reminder for that date to ensure you’ve received everything on time.)

No. 2: Gather your information

It’s easy to get slowed down in filing your taxes because you don’t have all the necessary information. So the best approach is being proactive.

 

If your taxes are straightforward, there may be little more to it than gathering personal ID information, such as Social Security numbers and birthdates, along with your W-2.

 

“However, if your taxes are more complex, you might have more work ahead of you,” Schulz says. “You’ll need records for all your various sources of income, ranging from stock sales and interest income to unemployment assistance and alimony. You’ll also need documentation for any deductions you intend to claim, including those involving your home, health care, child care or charitable donations. These things take time to pull together.”

Here’s some of the information you’ll want to have in advance:

  • Social Security number, tax ID number or employer identification number (if you’re a small business owner)
  • Total income. This can be calculated once you have all your forms from employers or pensions, like W-2s and 1099s. It should also include interest and dividend income, which your bank or brokerage should provide.
  • Total deductible expenses. Some common deductions include contributions to health savings accounts (HSAs), traditional individual retirement accounts (IRAs), student loan or mortgage interest and charitable donations. Depending on your line of work, you may also have related tax credits or tax-deductible expenses. You may also have to provide proof of contributions, or receipts, if applicable.
  • Taxes you’ve paid this year. For example, state or local income taxes paid beyond your normal withholding. Self-employed individuals who make quarterly estimated payments must also provide information about the amounts paid and corresponding dates.

No. 3: Consider using a tax professional

It sometimes makes sense to use a tax professional’s services. In that case, you’ll want to start looking for one soon.

 

“Everyone’s comfort level is different when it comes to tax preparation, but if you ever feel you’re out of your depth when it comes to doing your taxes, consider getting professional help,” Schulz says. “It’s too important to just try to guess your way through. If your filing only involves a W-2 or two, it may not be complicated. However, once you start to layer in things like side hustles, stock grants, rental properties and alimony, things can get confusing. Never be embarrassed or afraid to ask for help.”

Cost is a common concern here, so it’s a good idea to see what options are available locally and compare those to tax software. That way, you can gauge the costs versus the rewards.

 

“You don’t necessarily have to spend a fortune to get it done,” he adds. “For example, there are likely organizations in your area providing free tax prep services for folks with low income and other special circumstances.”

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This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.

Top tax pros reveal their top tax tips

 

It’s safe to say that millions of Americans are breathing a sigh of relief now that the IRS has pushed back the deadline to file your 2020 taxes from April 15 to May 17.

 

But you might not want to celebrate just yet, as there is a major downside to the extension. Fraudsters who attempt to take advantage of Americans on Tax Day now have even more time to try to separate you from your hard-earned income.

 

To help ensure you don’t fall into any financial traps this tax season, we asked some industry experts to weigh in on ways to stay safe when filing your tax return. From spotting scams to concerns over stimulus repayments, these tips can help you avoid any unnecessary headache on Tax Day.

 

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Phishing, check and phone scams are not new. But what is new is how fraudsters are applying these scams creatively to our times. For instance, it’s known that fraudsters typically send fake tax refund checks. They follow this by a written notice claiming that they sent you a higher amount than intended and that you’ll need to send them a portion of the money back. But what we’re seeing now is that they’re sending these as a form of fake stimulus checks.

 

The best way to detect a tax scam is by remembering that the IRS will not contact you by phone, text or social media. If you receive a written notice in the mail, verify that it’s actually coming from the IRS. Letters impersonating the IRS will often contain fake contact numbers, so don’t contact the numbers on the letter. Instead, visit the IRS website and contact them that way.

 

One of the best ways to stay ahead of fraudsters is to file your taxes early. You’ll not only avoid potential tax-related identity theft but also long lines at the tax accountant’s office. Filing early is especially important if you know you’ve already fallen victim to identity theft.

 

Many Americans are worried about having to pay back the money they’ve received from stimulus checks once they file taxes. However, this isn’t true. You’ll need to report the money you received, but the IRS states that “there is no provision in the law requiring repayment.

 

-Alexa Serrano, CAMS, Banking Editor at Finder.com

 

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In 2020, scams intensified due to coronavirus tax relief. According to the most recent IRS “Dirty Dozen” list, an annual list of the most popular tax scams, some of the most notable include:

  • Phishing – A scammer sends emails, letters, or text messages and impersonates the IRS with the goal to steal taxpayer personal information. They may also create dummy IRS websites with the same goal.
  • Threatening Phone Calls – A scammer calls claiming to be with the IRS and threatens arrest or deportation if the victim doesn’t pay a fake tax bill.
  • Refund Theft – This is a form of identity theft. A scammer files false tax returns under a victim’s name or diverts refunds to wrong addresses and bank accounts.
  • Unscrupulous Return Preparers – These scammers will refuse to sign the return (ghost preparers), ask the taxpayer to sign a blank return, or promise a large refund before looking at taxpayer records.

There are so many factors that can lower or zero out a tax refund. It depends on your tax situation. Contrary to popular opinion, it’s not ideal to have a large tax refund.

 

When you withhold too much in taxes, you’re giving the IRS an interest free loan, which means less money in your pocket throughout the year. Ideally, your goal should be to get as close to zero taxes owed or paid as possible.

 

-Melanie Bledsoe, CPA at Bledsoe Consulting Services

 

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File your taxes electronically if possible and have your refund directly deposited instead of taking a paper check. If you owe taxes, pay your taxes on the IRS Direct Paysite so that you can keep a record of them having your payment on time.

 

Also, if you are hiring a tax professional, make sure that they are using an encrypted/secure portal to transmit your tax documents as these documents should not be freely exchanged over email since the tax documents contain sensitive and private information.

 

The stimulus checks will have some impact. If you did not get a stimulus check, but your income falls under the threshold ($75K and under if you’re single, $150K and under if you’re married), you can still receive those stimulus payments as credits, which is refundable.

 

The credit can be used to increase your refund or reduce your tax liability. If you already received the stimulus payment, you will not be taxed on your tax return at all; however, you have to report the amounts received.

 

-Eric Pierre, CPA, Chief Executive Officer, Owner, and Principal at Pierre

 

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These tax preparers will end up getting more money from you if you allow them. Ensure that the tax preparer you’re in contact with has an IRS Preparer Tax Identification Number or PTIN. Do your due diligence by asking for their qualifications or credentials before transacting with any tax preparer. Lastly, do not sign a blank return or give any information if you aren’t entirely sure of who you’re dealing with.

 

-Paul Sundin,CPA and tax strategist at Emparion

 

The IRS will always mail you a bill if you actually owe taxes. You will also have an opportunity to defend yourself and appeal the amount you owe. Anyone who contacts with a demand for immediate payment via debit card, gift card, or wire payment is a fraudster.

 

A smaller refund can occur when you have income that is not subject to withholding such as self-employment income, interest, dividends and capital gains. It can also occur if you have reduced your withholding by making adjustments to your W-4.

 

-Eric Bronnenkant, CPA, CFP and Head of Tax at Betterment

 

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If you already received both stimulus checks, then your tax return shouldn’t be affected. However, if you had some substantial changes in 2020 (reduced income, having a baby, etc.) then consider filing as soon as possible to receive the highest amount you can when they send the third stimulus check.

 

I recommend using your tax refund to pay off debt, boost your savings or invest in your future. Depending on the amount you receive, you can use that money to really free up your finances so you’re in a better place in the months to come. 2020 was a difficult year for most people, so this is a great opportunity to pay off high interest debts or replenish your emergency fund.

 

– Jacob Dayan, CEO and Co-founder of Community Tax and Finance Pal

 

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Since the IRS communicates through the mail, it can be difficult to discern what is and isn’t a scam. Fortunately, few hackers have the skills to successfully imitate the IRS. If you’re issued a letter, it’s a good idea to review how the sender requests payment.

 

The IRS only accepts online payment through their official website and their electronic federal tax payment system. If the sender requests money through another site, it’s a giant red flag.

 

-Kristen Bolig, Founder at SecurityNerd

 

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