While 25% of the government remains closed due to a rift in congress over President Trump’s border wall plans, there are some key departments that will remain operational. The IRS, which is directly impacted by the shutdown, will recall 46,000 furloughed employees to work during the early stages of the tax season.
Steps to Prepare Your Tax
The tax filing season opens later this month on January 28. That leaves little more than a week to organize your tax documents if you want to file early. If you have been slow to start your preparation, then the following tips will help you to get organized before the season begins.
- Choose a local tax preparer. They will help you to organize all your documents and get the most from your returns. Look for a professional with a Preparer Tax Identification Number (PTIN).
- Schedule an appointment as soon as possible. The more time you have to work with your preparer, the more time you will have to lower your 2018 tax bill (or guarantee your returns).
- Prepare all documentation including supporting documentation for your income and any adjustments. Examples include W-2 forms, investment income forms like a 1099-INT, rental property income and expense statements, moving expenses, IRA contributions, energy credits etc.
- Itemized tax deductions need to be calculated and justified. Documentation to support these deductions should be obtained. Examples include receipts for medical and dental expenses, charitable donations, home mortgage interest, investment interest, child care costs, education costs etc.
- Reviewing pay stubs from throughout the year can help you to calculate your withholding and determine whether you will be eligible for a refund this season. Your preparer can help with this.
- If you aren’t using the same preparer as last season, then find a copy of your previous return. This will help both you and your preparer to get a broad overview of your typical tax structure.
- For complex payment situations, it’s possible to file for an extension that will last until October 2019. Starting early is best, but it’s important to know that you do have some flexibility if you struggle to get all your documents in order.
Use Refunds Wisely
Tax refunds can be used for reinvestment, retirement savings, or as a cash boost to your income. If you are otherwise financially stable, then your refund could also be withheld and calculated into next year’s filing.
Preparing your payments early and taking the time to consider the best use for any potential refund will help you to better plan your finances and investments in the year ahead.
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