• Tammy Hoang

10 Steps to Prepare for A Tax Return

With the extended 2017 tax filing season drawing to a close, now is the time to act promptly if you still need to claim a tax refund. Your preparer may take information directly from you or ask you to complete a questionnaire. Either way, you’ll need time to collect and organize the information. Here are 10 steps to take before meeting for your tax prep.

1. Choose a preparer

Hiring a professional – trustworthy tax preparer is actually important. Be sure that the person you choose has a Preparer Tax Identification Number (PTIN) showing his or her qualified authorization to prepare federal income tax returns. Also, the hire charges likely depend on the complexity of your return or steering clear of anyone taking a percentage of your refund. The IRS has interesting tips for choosing a preparer including a link to the IRS directory of tax return preparers.

2. Schedule an appointment

The sooner you meet with your preparer, the faster you can begin the process.

3. Gather your information returns

At this time, you should have received a large amount of types of information returns. For each form, verify that the information matches your own records.

The IRS has more details on a set of information returns you may need.

4. Collect your receipts

Necessary receipts depends on whether you choose to itemize your personal deductions instead of claiming the standard deduction. You can choose to itemize if this produces the greater write-off. Unluckily, the only way to know for sure is to determine the amount of your itemized deductions and compare them with your standard deduction amount.

For doing so, get all receipts together to retain receipts for various deductible expenses. Look for receipts for medical costs uncovered by insurance or reimbursed by any other health plans, property taxes, and job-related and investment-related expenses.

If you have business income and expenses to report on Schedule C, you’ll need to share your books and records (e.g., QuickBooks or other accounting system; receipts for expenses; bank and credit card statements). The more organized you can be, the less time it will take your preparer, which translates into lower fees for his/her services.

5. Gather records for charitable contributions

If you made charitable deductions, you need specific records to claim any write-off. For example, for contributions of $250 or more, you need a written acknowledgment from the charity stating the amount of your gift and that you did not receive anything (other than perhaps a token item) in return. If you’re lacking an acknowledgment, contact the charity and ask for it. You need it in hand by the time you file your return. Find breakdown about the form of records needed for charitable deductions in IRS Publication 1771.

6. Brace yourself for tax-law shift

This helps to know about new tax rules so you won’t be caught off guard.

7. Make a list of personal information

You probably know your Social Security number, but do you know the number for each dependent you claim? Make notes carefully (e.g., addresses of vacation homes and rental property; dates you moved; information about property you bought and sold including dates, original amount paid, what you received on the sale and expenses you had) to complete your returns.

8. Decide whether to ask for a filing extension

Be sure to pay what you think you’ll owe to minimize or avoid any late-payment penalty.

9. Determine what to do about a refund

If you expect a refund, you have several options on what you want the government to do:

  • Apply the refund toward your tax bill on the next return. The fund will be used for estimated taxes, reducing or eliminating the first installment of estimated taxes.

  • Send you a check or deposit the refund directly into your checking or savings account.

  • Directly contribute some or all of your refunds to certain types of accounts (IRAs, health savings accounts, education savings accounts) or to buy U.S. Savings bonds through Treasury Direct.

You can split your refund among the direct deposit choices by completing Form 8888. You’ll want to tell your tax return preparer what you want to do. And if you want the refunds used for 2016 purposes (e.g., you want to use the refund to make a deductible IRA contribution for 2016), you’ll need to inform the institution about the right year to which it should apply your payment.

10. Find a copy of last year’s return

If you use the same preparer that you used last year, likely the old return is already on hand. If you go to a new preparer, last year’s return serves as a reminder to the preparer.

In conclusion, starting early tax-prep work brings you successful tax return experiences.

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