Top Tips for Tax Time
Explore ways to make your federal tax return as painless as possible.
Tax season is in high gear from January to mid-April, with the federal filing deadline typically falling on April 15. In general, this date is also your last opportunity to contribute to your Individual Retirement Account (IRA), Simplified Employee Pension (SEP) or Keogh plan. Here are some pointers to help you get ready for the big day.
Watch Your Mailbox
In January, you'll get a tax package from the Internal Revenue Service (IRS) and start receiving the documents needed to complete your return. You'll get a W-2 wage statement from your employer, as well as a Form 1099 from each financial institution that paid you interest, from any brokerage firm where you have earnings or losses, and from the corporations and mutual funds in which you own shares.
Organize and Plan
File your tax documents somewhere you can find them easily. Then do a few initial tax calculations as April 15 approaches. This will help you predict whether you're going to get a refund or owe money. And remember that the earlier you file your return, the sooner you receive a refund, if you're owed one.
Understand What’s Included in Gross Income
Gross income is all of your taxable income from a particular year. This includes earned income such as your salary, wages and tips, plus sick pay, unemployment wages and strike benefits. It also includes investment income, which is your capital gains, interest and dividends. If you have farm income, rent payments from tenants, gambling earnings or retirement and Social Security payments, they all might be included as well.
Some pieces of financial information don’t need to be reported on your tax return. These include workers compensation benefits, veterans’ disability benefits, welfare income, Supplemental Security Income from Social Security, child support payments, life insurance payouts and scholarships for college tuition.
Know When to Itemize
When figuring out your taxable income, you can subtract certain exemptions and deductions that apply to your situation. You can also subtract the standard deduction—a fixed dollar amount—or itemize all of the qualifying payments you've made during the year and subtract that total.
If you don’t itemize, calculating your refund or payment tends to be straightforward. File a simple return such as a 1040EZ, or a 1040 with no itemized deductions (if your income is less than $100,000) and send it in by April 15, and the IRS will calculate your refund or payment for you.
If the interest you paid on your home’s mortgage is larger than the standard deduction, it’s typically in your best interest to itemize. You can also itemize real estate taxes and both state and local income taxes.
Ask for Help If You Need It
For the most part, completing your federal tax return is a matter of following a set of instructions line by line. However, it’s possible to get stuck. If this happens, stay calm and visit the individual filers page of the IRS website. This page contains answers to frequently asked questions, plus a link to several phone numbers you can call to receive live assistance from an IRS agent.
The IRS also operates two programs that provide free basic tax preparation for people with disabilities, taxpayers who speak minimal English and individuals whose income is $56,000 or less.
This content is intended to provide general education about tax returns, not professional advice tailored to your situation. For personalized recommendations, consult a qualified tax advisor.