5-Point Checklist for Filing Your Taxes
With the April 18 tax filing deadline less than two weeks away, now's the time to get cracking on your 2016 return. Here's how to prepare your taxes quickly and efficiently.
1. Get your paperwork in order
If you're a salaried employee with no deductions or outside income, gathering your tax paperwork is a simple matter of taking your W-2 out of your filing cabinet. But if you have additional sources of income or are planning to take deductions, you'll need to assemble the appropriate information to file an accurate return. You can consult this tax preparation guide for a comprehensive list of the documents you'll need on hand.
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2. Follow up on missing forms or information
Anytime you receive income apart from your regular paycheck, you're required to report it to the IRS and pay your share of taxes on it. If you've gotten paid from various sources, whether in the form of savings account interest, dividend payments, or compensation for freelance work, you're likely to have received a bunch of 1099 forms summarizing your additional income. Sometimes, 1099s are sent electronically; other times, they arrive by mail. But if you're missing a 1099 form and aren't sure how much associated income to report, your best bet is to contact the issuer and request that information rather than guess at it.
The reason? The IRS also gets copies of 1099s, and if it has a record of income you're not reporting (or shows a higher amount than you're reporting), there's a good chance it will choose to further investigate. Now if you know the amount of income your missing form would've otherwise shown, you can just list it on your return and call it a day -- but make sure you really know how much to put down.
Similarly, if you're claiming a deduction for something like mortgage interest, medical expenses, or anything else that requires precise records, don't just give a rough estimate in the absence of hard data. Rather, contact your lender for an interest statement, call your doctors' offices for billing summaries, and do whatever it takes to get your hands on those exact numbers. The more accurate you are, the better protected you'll be in the event of an audit.
3. Read up on deductions and credits
The IRS offers a host of valuable deductions and credits that can work to lower your taxes, but if you aren't a tax expert (which most of us aren't), you may not know which ones to claim. However, if you're willing to do some research, you could come away just a bit richer this tax season. The IRS's Publication 17 is your ultimate resource for all things tax-related. While it's by no means a short document, it's also fairly easy to navigate, and it contains a wealth of information on deductions, credits, and associated rules.
4. Review your filing options
Each year, loads of people spend hours waiting on line at the post office to get their returns mailed out in time for the deadline. While you can always go the paper route, you're much better off filing your return electronically.
First of all, if you file electronically, you're less likely to make a major error that could cost you money or cause your return to get audited. Furthermore, the right software can help you identify key credits and deductions you may not have otherwise known about. Finally, if you file electronically and are due a refund, you'll typically get it much sooner than you would by filing on paper. Most refunds from electronic returns are processed within three weeks, and you can typically check up on your refund's status within 24 hours of filing. If you earn less than $64,000 a year, you can use the IRS's Free File tool to prepare your return at no cost, so it pays to skip the paper and do everything online.
5. Check your return for errors
While filing your return electronically can reduce your chances of making a mistake, it can't eliminate the possibility entirely. Before you submit your return, check to make sure you've copied all of your numbers over correctly, and that your personal information (like your Social Security number) is all correct. Honest, simple mistakes can cause your tax return to get rejected and delay the processing of your refund, so you're better off spending a few extra minutes reviewing your work.
Remember, you don't have much time to get last year's taxes submitted, so if you've yet to begin working on them, don't delay. Though you do have the option to file for an extension, that won't buy you extra time to pay any taxes you owe, so you might as well get your return in order and find out what you're dealing with.
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