With the rush of the upcoming holidays and just weeks away from the New Year’s tax season officially getting underway, it is just about right time to consider your tax preparations. Tax season creeps upon millions of taxpayers every year as a recurring exercise. Instead of being caught off guard towards the end, one can actually follow few guidelines to start preparing for the upcoming 2018 filing season and gain an advantageous head start.
1. Review your filing status:
Filing status can impact as to how much one owes in taxes each year, and whether or not one would have to file at all. It is also important to forecast if ones filing status will change during the course of the year.
For someone who’s single and is planning to get married by Dec. 31, 2018, choosing to file a joint or separate return with the future spouse would be viable options.
Alternatively, one might be filing as a single taxpayer if he/she expects to get divorced during the year or as head of household if single and having a child or taking on another dependent.
2. Look back to leap forward:
It is expected that by now the 2017 tax filing would have be filed for or at least an extension applied. If the 2017 taxes have already been filed for, then a review considering the areas that were problematic or extra stressful would be helpful. This can come in handy in alleviating that stress for the upcoming season.
3. Set up your system:
Organizing tax records can be done in numerous ways. However, having an established filing system in place would feature as the core of the organizational structure. Waiting until 2019 is not a good idea to start sorting out important documents of 2018. While many important tax documents will arrive at the beginning of 2019, others like receipts for deductibles will sprout out along the year.
4. Save documentation for deductible items:
Receipts and other documents for eligible expenses are crucial components; though it might not be necessary to submit those receipts with the tax return, it may be required to substantiate the expenses if the IRS audits the returns. Hence, whether a business or a personal account, it would be wise to hold on to receipts meticulously.
5. Track your charitable contributions:
The old saying goes, “What goes around comes around.” When you do good for others, you deserve to get some tax benefits. Charitable contributions to qualified organizations in the itemized deductions may require a little extra documentation. For example, deductions for contribution worth more than $250 cannot be done without a written acknowledgment from the recipient organization.
It must also be noted that non-cash contributions may require different records, such as a description of the donation and its fair market value. In order to ensure full tax benefit of one’s generosity, keeping good records of all charitable contributions to qualified organizations throughout the year will be highly crucial.
6. Plan for your retirement:
Having 401(k) or traditional IRA, may help get a tax break by making a contribution to ones retirement account. The contributions made on these accounts are typically deductible on the pertaining tax return.
It would be useful to remember that though there are income restrictions and contribution limits that determine how much can be put in an IRA, and deferral limits on how much can be put into your 401(k). Understanding what those limits are, and how much can be contributed for the year will come in handy.
7. Forecast your estimated taxes:
It is common knowledge that underpaying taxes throughout the year can have very negative repercussions. If one is expected to owe at least $1,000 in taxes, the IRS generally requires one to make estimated tax payments throughout the year. This is especially highly critical for business owners or self-employed individuals who generally don’t pay income taxes on their earnings.
8. Stay abreast with the changing Tax rules:
The Tax Cuts and Jobs Act that took effect in December 2017 ha brought about drastic changes in the U.S. tax code.
In general, tax reforms can translate to two things:
- Some of the tax breaks you might have taken advantage of in the past will no longer exist.
- There may be some new tax breaks you can use when preparing for 2018 taxes.
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Not only do we regularly keep updated with the latest tax laws, but support high-end infrastructure which allows us to function as a virtual extension of our client’s team, while ably providing our cost-friendly services.
If you have any queries related to your tax returns feel free to contact us for detailed information, we will be glad to assist you.
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