Most of us don’t particularly enjoy dealing with the deadlines and paperwork required to file federal income taxes. But just because taxes may not be the world’s most pleasant topic, doesn’t mean you can sweep this issue under the rug.
Think about it this way: by filing your federal income tax return on time, you not only stay on Uncle Sam’s good side, you’ll also save yourself money and unnecessary aggravation. To help make April 15th a lot less taxing (pun intended) here are four do’s and don’ts when dealing with the IRS.
- Do get your paperwork in order: Sure it’s a hassle, but gathering all necessary paperwork is the best starting point for filing your taxes. For proof of income, grab your W-2, which your employer is supposed to send you by January 31. Also, collect any 1099 forms you may have received if you had freelance or self-employment income of $600 or more. If you paid student loans or a mortgage, 1098 forms will show how much interest you paid on those loans. Finally, pull together important receipts for tax deductions, such as job-hunting expenses, large medical bills, and donations to charity.
- Do claim deductions and credits for which you qualify: Plenty of people take the easy way out at tax time and fail to itemize deductions or claim tax credits for which they’re eligible. Don’t make this mistake. A tax deduction cuts how much income you can claim, thereby lowering your tax bill. But a tax credit of the same amount is usually more valuable because a tax credit amounts to a dollar for dollar reduction in your taxes owed.
- Don’t ever miss the filing deadline: Every year, we all have to file our federal income taxes by April 15th, (except when Tax Day falls on a weekend or holiday). So don’t procrastinate about submitting your 1040 income tax return; waiting until the last minute will only add to your stress during tax season. There’s another good reason to send your federal return to the government on time: people who miss the tax-filing deadline can be subjected to failure to file penalties and late fees. If you absolutely can’t file on time – due to work, school, travel or other commitments – be sure to complete IRS Form 4868, requesting a 6-month extension.
- Don’t forget to do some smart tax planning: According to the IRS, as of 2019, most Americans get a tax refund check of about $2,711. It may feel good to get a juicy refund check from Uncle Sam, but that refund means you’ve given the government an interest free loan for a year. Instead of waiting to get your money, and receiving large refunds annually you may want to consider adjusting your withholdings at work, but everyone’s individual circumstances are different, so speak to a tax advisor before making any decisions.
And here’s a bonus tip: If you earned an annual income of $69,000 or below in 2020, use the IRS Free File site to prepare, complete and e-file your federal tax return – all at no cost.