Tax season is officially underway, with taxpayers facing a deadline of April 15 to submit their returns to the IRS. As the filing date approaches, experts recommend that individuals begin their preparations to alleviate the stress associated with last-minute submissions.
### Getting Organized Early
Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, stresses the importance of early organization. “Don’t wait until the last minute but also don’t rush,” he advised, urging taxpayers to gather necessary documents, sign up for direct deposit, and keep copies of previous tax returns.
This year marks a significant shift in tax regulations following the recent Republican tax and spending legislation signed by President Donald Trump. Changes include new deductions that could benefit a range of taxpayers.
### New Deductions and Benefits
Some of the notable updates include exemptions from taxes on tips and overtime pay, along with deductions for car loan interest and special provisions for individuals aged 65 and older by December 31. Miguel Burgos, a certified public accountant and TurboTax expert, highlights the potential financial advantage, noting that the average tax refund last year was $3,167, a figure that analysts predict could climb by about $1,000 this season due to these legislative changes.
Over 165 million individual income tax returns were processed last year, with 94% submitted electronically, demonstrating a growing trend towards digital filing.
### Essential Documentation
To efficiently file a tax return, taxpayers should gather a range of documents. A comprehensive list includes:
– Social Security number
– W-2 forms for employed individuals
– 1099-G forms for the unemployed
– 1099 forms for self-employed individuals
– Savings and investment records
– Receipts for eligible deductions, including medical expenses and charitable donations
– Records of tax credits, such as the child tax credit
Taxpayers are encouraged to check the IRS website for a detailed list of required documents specific to their individual situations.
O’Saben advises individuals to consolidate all necessary documentation in one place before starting their return preparation. He also recommends having last year’s documents on hand as a reference. Additionally, taxpayers can create an identity protection PIN with the IRS to combat identity theft; this number will be necessary for filing.
### Changes to Key Deductions
Significant changes include adjustments to the standard deduction and state and local taxes (SALT) deduction. This year, the standard deduction is set at $15,750 for individuals, $31,500 for married couples filing jointly, and $23,625 for heads of households. More notably, the SALT deduction cap has increased dramatically from $10,000 to $40,000, a change that is particularly advantageous for residents of states with high local taxes.
Keith Hall, president and CEO of the National Association for the Self-Employed, points out that this revised cap will especially benefit residents of high-tax states like California and New York, offering relief to many taxpayers who have previously been restricted by the lower cap.
Taxpayers who have not itemized their SALT deductions in previous years may find it beneficial to reconsider this option given the changes. O’Saben suggests individuals evaluate their eligibility by examining their payments related to state taxes, property taxes, mortgage interest, and charitable contributions.
### Navigating Potential Pitfalls
As tax season draws nearer, taxpayers are advised to be vigilant about potential scams that often proliferate during this period. O’Saben suggests verifying information carefully to avoid common mistakes. He recommends double-checking the name on the Social Security card and ensuring all income is accurately reported, as the IRS conducts audits for discrepancies.
To assist with tax preparation, several resources are available. Taxpayers earning $89,000 or less can utilize the IRS Free File program for guided tax preparation through approved partners. The IRS also provides free resources through Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE), programs designed to offer tax help to qualifying individuals.
Taxpayers are encouraged to take proactive measures to maintain financial well-being, including filing returns electronically for quicker refunds, which are now primarily issued through direct deposit following the IRS’s phased-out paper check system.
With the deadline fast approaching, careful preparation and staying informed about changes in tax regulations will be essential for a smooth filing experience. By addressing these points, individuals can position themselves for an efficient tax season and potentially greater refunds.
Source: Original Reporting
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