Taxes are a normal part of the employment process. Depending on the initial setup of your payroll withholding, you may be over or underpaying your taxes. Sometimes, you’ll overshoot the target or not make it. To make the difference during tax filing season, it will be necessary for you to file for your income tax return with the Internal Revenue Service (IRS).
First-time tax-filers should also keep the following in mind:
Consider getting your parents to claim you as a dependent:
Young adults who still live with their parents or receive financial aid for their education may be listed as dependents. You can either be considered qualifying children or qualifying relatives.
Keep your paperwork for the entire year
Keep track of medical bills, work-related expenses, and other items like charitable donations. Statements from fellowships, grants, student loans, and investments may also come in handy. Organize and store these documents after you file them as well
Monitor your income
Filing for tax returns is required when your income hits a certain level. For individuals with multiple streams of income, make sure you add them up along with any investments and interests.
Learn about the deductions and credits applicable
With proper documentation, up to $2,500 may be deducted from student loan interests. Likewise, contributing to a retirement plan makes you eligible for credit, depending on your adjusted gross income and filing status (single or married).•
Gather your tax documents in one place
These include your 1099s, W-2s, receipts, tax deductions, and tax forms detailing your other forms of income.
After thorough preparation, you can now use this to file your taxes and tax returns early. Here are 5 reasons to do so:
Experiencing Less Competition
Choosing a tax expert to work with becomes increasingly difficult as tax season approaches. Sometimes, failing to set an appointment with professionals a month before your due date can delay the process and force you to file for an extension. As an alternative, you can prepare your own taxes with professional tax software like www.ultimatetax.com.
Protecting Refunds from Possible Identity Thieves
Tax Return Fraud occurs when other individuals file tax returns using your Social Security number. In the unfortunate event that you fall victim to this, it will take you months to coordinate with the IRS before your refund is fully processed. Filing early reduces the risks of experiencing identity theft. If a thief attempts to file tax returns under your name, their transaction will be denied.
Avoiding Tax Extensions
Filing your taxes early helps you avoid any additional fees, interests, and penalties. This is crucial as according to the IRS, filing late gives you an additional 5% of your unpaid or late taxes. These penalties start accumulating after the deadline with a 25% maximum limit. Moreover, filing taxes close or past the deadline increases your need to work with a tax professional to get your finances sorted and complete the return process.
Gaining a Better Understanding of Your Financial Information
Finishing your tax returns ahead of time becomes more advantageous for you in the long run. Generally speaking, claiming your refund or paying your dues gives you a head start on other essential paperwork. For instance, home buyers can use these documents as proof of their income while college students or applicants can use the relevant information for financial aid.
Receiving Your Money Earlier
Filing earlier lets you know the payment or refund amount ahead of time, which differs every year. But probably the most common reason to file taxes early or on time is to get your refunds earlier. Keep in mind that paper applications may take a few weeks. For this reason, it’s best to connect your direct deposit to your online applications. This can take anywhere between 7 and 10 days.
There are also other alternative methods. You can file your tax return through:• Free File – Check to see whether you can use the IRS free tax preparation software. It contains features that help you identify which deductions and credits may be available to you.• Tax Preparer – You can also gain access to one-on-one assistance from trusted accountants and tax preparation firms. Look for verified tax preparers from the IRS’s directory.
File Your Taxes Early with Professional Assistance
Prepare all your documents ahead of time to file your tax returns promptly and more efficiently. At the end of the day, this allows you to better manage your finances in a timely manner. Regardless of your income, whether from single or multiple sources, you’ll get peace of mind and avoid any unnecessary delays, additional fees, and inconveniences with the IRS.