It is that time of the year again. Tax season has rolled around, and you find yourself wondering what took all year to prepare your tax return. Overwhelmed by all the numbers, calculations, and crazy deductions you can take, you may have forgotten the little things that will help ensure your taxes are filed with ease.
We want to ensure you are as prepared as possible for filing your tax return. We have compiled a list of items you may want to consider when preparing your taxes this season to help avoid any stressful situations or mistakes that could cost you money in the long run.
The following are some things to keep in mind while filing:
- If you qualify, claim the Earned Income Tax Credit. This is a credit to offset your income tax liability if you are working but may not afford to claim every possible adjustment.
- Use the IRS’ Free File service at FreeFileAlliance or take advantage of free tax filing software like TurboTax. Most will allow you to file for up to five family members at no cost, which can save you hundreds in fees.
- If eligible, start an Individual Retirement Account (IRA) with a company like TD Ameritrade or Fidelity. Not only do they offer great services and products, including free training classes, but they also provide education about retirement planning and keeping your money safe until that day comes.
- Understand income tax withholding – every dollar withheld from your pay, less your taxes due is a dollar you get to keep. By filling out a new W-4 and changing the number of allowances you claim, it can make more money available for you throughout the year.
- If you choose to itemize deductions, be very careful with what medications you take. Taxpayers who do not have at least one qualifying medical expense that exceeds 10% of their total adjusted gross income are limited in claiming drug costs on Schedule A.
- Don’t forget to cancel your gym membership or turn off your home security alarm. Certain personal expenses may not be deductible (or they can only be deducted in certain circumstances).
- Consider making charitable donations before the year’s end rather than at the last minute. Those contributions deemed “cash contributions” may deduct part of their contribution while receiving an immediate tax credit for the value of those same contributions if made by December 31, 2019. Keep track of charitable donations throughout the year and make sure they are filled with receipts. Remember: donated goods need proper documentation as well!
- Keep track of medical deductions and be prepared to have any tests or information on file should you need them reviewed by an auditor.
- You may be eligible to deduct educational expenses paid during 2019 if you, your dependent, or your spouse are enrolled in an eligible educational institution. In addition, you can even claim interest on student loans you paid throughout the year for yourself and/or your dependents. These tax credits and deduction options are available for students who will continue their education past high school, as well as those returning to attend college after a break of several years.
There you have it – our top 9 things to consider when filing your tax return in 2020. While we can’t guarantee we’ll be able to keep things straight for you, giving these a read will at least put you ahead of the curve when it comes time to prepare your taxes and move on with life!