Tax season is here! Avoid as much stress as you possibly can when filing your 2021 taxes with these helpful tips for setting yourself up for success.
Organize Your Tax Documents
Before you get started, getting organized is the first step toward a stress-free tax filing. Ensure you have received all your relevant tax documents have stored them in one place. It’s best to organize them separated by those used to report your income and then any that will be used to claim a tax credit or deduction. Most forms will remain the same throughout the years, where income streams remain consistent and little to no significant life events occur. However, it is helpful to know what to look for, so we have provided a list of the most common income documents and the common credits and deductions for 2021.
Common Income Documents
Regular Income (W-2)
Freelance or Consulting Income (1099-NEC)
Interest Income (1099-INT)
Unemployment Income (1099-G)
Common Credits and Deductions
Child Tax Credit (For Payments Not Yet Received)
Recovery Rebate Credit (Missing 2021 Stimulus Payment)
Saver’s Credit (Retirement Contributions with Under a Certain Gross Income)
Interest Paid (Mortgages, Student Loans, etc.)
Property Taxes (Varies by State and Town)
College Tuition (For Yourself, Spouse, and/or a Dependent)
Charitable Donations
Medical Expense (Medical Bills Exceeding a % of Gross Income)
Freelancing/Self-Employment-Related Expenses
To view a complete list of qualifying tax credits and deductions, visit IRS.gov.
Plan Ahead for Filing Before the Tax Deadline
The deadline for filing your taxes is April 15th, but most people receive all necessary tax documents in January and February, leaving about two months to prepare tax returns. While this feels like plenty of time, it is recommended to start early enough to be able to break it into one or two additional sessions. Planning additional sessions will create more time to locate any missing documents or get help to ensure everything is done accurately. In general, experts recommend filing as early as possible to create a better chance of avoiding tax-related identity theft and increase the possibility of receiving any owed tax refund sooner.
File Using the Best Method for You
When it comes time to start filing taxes, there is no one road to take. It’s essential to choose the best method for you regarding your financial status and knowledge of the tax filing process. Choose from any of the options below that apply to your tax situation.
IRS Free File
If your adjusted gross income was $73,000 or less in 2021, you could utilize the IRS free tax prep software. This software includes features to make the process easier by helping you figure out any deductions or credits you may be able to take.
IRS Online Forms
For those comfortable filling out their taxes, the IRS has electronic versions of paper forms that will do the math for you and are available to all income levels. These forms only offer basic guidance and won’t help you figure out which credits and deductions you can take.
Tax Preparation Software
Commercial tax preparation software is available for a small fee to anyone seeking additional guidance. These are available through several providers that will ultimately walk you through the preparation process and help determine which credits and deductions you can take.
Tax Preparation Expert
Tax preparation experts such as specialized firms or accountants can provide one-on-one help to those with simple to complicated returns. It’s essential to choose a provider you trust, as they will handle your most sensitive financial information. If you are having trouble finding someone, the IRS can assist in finding a verified tax preparer in your area, which does not guarantee trustworthiness but provides a starting point.
Choose Direct Deposit for your Refund if Possible
Receiving your tax return by direct deposit is now among the top tax filing tips from the IRS. This method of obtaining a tax refund has proven to be the fastest and safest way to receive your funds. The process of acquiring a paper check by mail can cost over $1 per check and is at risk of being stolen or lost in the mail, creating significant delays and costs for taxpayers. In addition, there is also the added convenience of being able to deposit a tax refund into not just one but three different bank accounts via either electronic or paper filing.
Don’t let tax season stress bring you down! Deposit your tax refund into a Mechanics account and follow our other tips for stress-less filing in 2021. Open an account today!
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