What is the process of preparing a tax return?

Your tax return is basically a documented file with the Internal Revenue Services or state tax authority. It reports your income, expenses, and other relevant financial information. You must file your tax to ensure compliance with your federal and state tax laws. It will help determine your tax liability, allowing you to receive refunds and claim credits.

Read this blog to understand the importance of filing your tax return properly on time.

Do You Need To Gather The Necessary Documents?

Are you aware of the documents you might need? Before starting the return process, you must collect your income-related forms. Collect W2 forms if you are an employee and 1099 if you are a contractor or freelancer. Keep track of all your charitable donations, medical expenses, and business expenses.

Remember to protect your own and your spouse’s Social Security Numbers. Being organized will help you with the preparation and reduce the risks of errors. 

What are the important steps in the process of tax return preparation?

Here are the steps you must take for your process of tax return preparation :

Your Filing Status

Why does it matter? This status will impact your deductions, tax rates, and eligibility for credits. The IRS will recognize if you are married with no dependents, a couple with joint incomes, a married couple filing your taxes separately, or an unmarried individual supporting a dependent. Select the right one for maximum credits.

Calculating Income Deductions

This process will help you determine your taxable income and subtract the eligible deductions from your total earnings. The are two primary deduction types that you must be aware of. The standard deduction is a fixed amount based on your filing status. Itemized deductions include your mortgage interest, medical expenses, and so on. 

Claiming Your Credits

Tax credits can directly reduce your tax amount and give you refunds. Your common credits include the Earned Income Tax Credit, designed for low-to-moderate-income workers and families. Child Tax credit can offer you up to 2000 dollars for every child under 17 years. The American Opportunity Credit and Lifetime Learning Credit can help you deal with educational expenses.

Pay Your Taxes 

If you do owe taxes, the IRS will provide you with several payment options. You can choose online payments. Uncomfortable with online transactions? You can also mail a check or money order. Set up an installment plan for larger balances.  If you are expecting a refund, click on the refund button on the IRS website.

Do You Need Professional Assistance For The Right Filing Method?

Are you worried about choosing the wrong filing method? In that case, professional tax planners might be able to help you with the process. For manual filing, you need to complete the IRS forms by hand and mail them. However, you do have to invest considerable time. If you are tech-savvy, use options like TurboTax, Tac Act, etc.

A professional can provide you with assistance, especially if you have complex social situations. Do assess the average cost of hiring a tax planner.

Feeling overwhelmed? Using a structured approach for assessing your returns will simplify the process. Gather all the necessary documents and choose the right method and status to avoid any common mistakes and errors. You can easily optimize your tax outcome. Prepare early and seek professional assistance if necessary.

Ready to file your tax returns like a pro? Seek assistance today!