A proactive guide to tax return preparation

Filing your tax return early offers several benefits, including faster refunds, reduced risk of identity theft, and more time to gather necessary documents. According to the IRS, early filers are less likely to make errors and more likely to receive their refunds sooner. Additionally, starting early gives you ample time to understand any changes in tax laws and how they might affect your filing.

Step-by-Step Guide to Preparing Your Tax Returns

1. Choose a Tax Preparer

Finding a reputable tax preparer is crucial. Referrals from trusted sources like friends, advisors, or attorneys can be helpful. Ensure your preparer has a Preparer Tax Identification Number (PTIN) and inquire about their fees. Avoid firms that charge a percentage of your refund. The IRS website offers tips for choosing a preparer and a directory to search for preparers by credentials and location.

2. Schedule an Appointment

The earlier you schedule an appointment with your tax preparer, the better. Early scheduling allows you to complete your tax return sooner and take advantage of opportunities to lower your tax bills, such as making deductible contributions to retirement or health savings accounts.

3. Gather Your Documents

By the end of January, you should receive all necessary tax documents from your employer and other financial institutions. Common forms include W-2, 1099 series, and 1098. Ensure the information on each form matches your records. Organizing these documents will make the process more efficient for your preparer.

4. Round Up Your Receipts

Whether you itemize your deductions or claim the standard deduction, keeping receipts is essential. Compare the total of your itemized deductions with the standard deduction to determine which option provides a bigger write-off. Keep receipts for medical expenses, property taxes, and investment-related expenses, as these are subject to limits and may be worth itemizing.

5. List Your Personal Information

Make a list of your Social Security number and those of your dependents, as well as any other relevant information your tax preparer may need. This step ensures that you have all necessary personal information readily available.

6. Decide Whether to File for an Extension

If you need more time to complete your tax preparation, you can request a six-month extension to file your tax return. However, you still need to pay any taxes you owe by the regular filing deadline to avoid penalties and interest.

7. Plan Ahead for Any Refund

If you expect a tax refund, consider applying some or all of it towards next year's taxes, contributing it to certain types of accounts, or buying U.S. savings bonds. Planning ahead can help you make the most of your refund.

8. Find a Copy of Last Year's Return

Last year's return can serve as a reminder for both you and your tax preparer of items not to overlook, such as interest and dividends or charitable deductions. Having this information handy can help ensure that you don't miss any important details.

Benefits of Filing Early

Faster Refunds and Peace of Mind

Filing your tax return early means you'll receive your refund sooner. The IRS typically begins accepting tax returns in January, allowing you to submit yours well before the official deadline. This not only provides peace of mind but also ensures you have access to your money earlier, which can be particularly helpful for those who rely on their refunds to pay major bills or cover holiday expenses.

Identity Theft Protection

Identity theft is a growing concern for taxpayers. Filing your tax return early reduces the risk of someone else filing in your name and claiming your refund. The IRS will process your return before an identity thief can submit a fraudulent one, preventing potential complications and the need for lengthy resolution processes.

Understanding Tax Law Changes

Tax laws and regulations are subject to change, and staying informed about these updates is crucial for accurate tax filing. By starting your tax preparation early, you'll have ample time to understand any changes and adjust your filing accordingly. This can help you avoid potential audits and penalties that may result from inaccurate or incomplete returns.

Starting your tax preparation early offers numerous benefits, from faster refunds and identity theft protection to a better understanding of tax law changes and the ability to adjust your filing accordingly. By taking a proactive approach to your taxes, you'll save time, reduce stress, and ensure a more accurate and comprehensive filing process.