Your Tax Preparation Checklist
Tax season can feel like a big headache - so many forms, deadlines, and numbers to figure out. But it’s not all bad! Tax season means a refund for many people, and that extra money can be a real help. Imagine using it to pay off some bills, build your savings, or treat yourself to something you want.
The good news? With some preparation, filing your taxes doesn’t have to be so stressful. Check out this simple checklist to help you get ready.
Step #1: Verify Your Details
Before you start gathering your tax documents, take a moment to review your previous year’s tax return and note any changes in your personal life. Life events, such as having children, can drastically change how much you owe to Uncle Sam.
- Review Last Year’s Return: Grab your tax return from last year and any supporting documents you used to file. This reference is a great place to start because it can refresh your memory about how you filed and which forms you submitted. Note anything that might need to be updated.
- Update Your Personal Information: Double-check the accuracy of all contact information and other essential details. Ensure your information is updated if you recently moved, switched phone numbers, or have a new email address. Also, note any changes in your personal life that could affect your taxes, such as life events like getting married, becoming divorced, having children, etc. All these situations will play a role when filing.
Step #2: Gather Your Documents
Your mailbox is probably already filling up with important tax documents. Most employers and other entities must send official tax correspondents by January 31. It’s always wise to wait a couple of weeks after that deadline before you begin filing to ensure no documents are held up in the mail or overlooked.
The most common tax forms you’ll need when filing include:
- W-2: Your employer issues your W-2, which contains information such as your past year’s earned wages, taxes withheld, and other important details.
- 1099: There are several kinds of 1099 forms, such as 1099-MISC, 1099-INT, and 1099-DIV. These documents detail additional income you earned throughout the year outside your primary job. Examples include interest earned on savings or investment accounts, retirement distributions, freelance work, rewards or prizes, unemployment compensation, etc.
- 1095: Like 1099 forms, there can be different types of 1095 forms. These documents relate to healthcare coverage, verify whether you had medical insurance throughout the past year, and detail your paid premiums.
Step #3: Itemize Your Deductions
Deductions help reduce your taxable income, ultimately lowering your tax bill to Uncle Sam. For example, if you made $75,000 at work and qualify for a $3,000 deduction, your taxable income would be $72,000 ($75,000 - $3,000).
Everyone qualifies for a standard deduction to help lower their tax burden. For most people, the standard deduction is more than they would qualify for if they itemized their deductions, but you or your CPA won’t know for sure until you run the numbers.
For reference, the standard deductions in 2024 were:
- $14,600 for single filers or married couples filing separately.
- $21,900 if filing as head of household.
- $29,200 for married couples filing jointly.
Depending on your financial situation, your deductions might outweigh the standard deduction amount. Here are some of the common deductions you may be able to claim:
- Retirement Account Contributions
- Education Expenses
- Medical Bills
- Property Tax & Mortgage Interest
- Charitable Donations
Step #4: Check Your Tax Credits
Like deductions, credits also reduce your tax bill to Uncle Sam. However, instead of reducing your taxable income, credits directly lower your owed taxes. For example, if you owe $15,000 for the year in taxes but qualify for a $3,000 tax credit, your tax bill would be $12,000 ($15,000 - $3,000).
Depending on your circumstances, you might qualify for select tax credits. Here are some common credits you may be eligible to receive:
- Earned Income Tax Credit: The Earned Income Tax Credit (EITC) helps low- to moderate-income workers lower their tax burden. It’s primarily geared toward lower-income earners with children or other dependents.
- Child Tax Credit: The Child Tax Credit (CTC) allows families to reduce their tax bill for each qualifying child. The tax credit amount decreases as the filer’s income increases, meaning higher-income earners might not receive a CTC.
- Education Credit: If you paid for qualified higher education expenses for yourself or a dependent, you may qualify for education tax credits to lower your tax bill.
- Saver’s Credit: You may be able to claim credits on eligible contributions to your IRA (Individual Retirement Account) or employer-sponsored retirement plan, such as a 401(k).
- Clean Energy Credit (Home or Vehicle): If you purchased an electric or hybrid vehicle during the taxable year or made clean energy improvements to your home, you may qualify for specific tax credits.
- Health Insurance Premium Tax Credit: If you purchased health insurance through the Health Insurance Marketplace for yourself or your family, you may qualify for a refundable tax credit to offset your paid premiums.
Understanding all the various tax credits can be challenging. If you’re filing your taxes online with a business like TurboTax, their software will generally ask questions to determine whether you qualify for credits. If filing with your CPA, they will likely have a form with similar questions to gauge whether specific tax credits are due to you.
You can also check the IRS website to determine whether you qualify for specific tax credits.
Step #5: Mark Your Calendar
When filing your taxes, you don’t want to be late. Otherwise, you might incur costly fees and interest charges. Instead, note these important dates on your calendar and begin preparing to file soon.
- Tax Filing Begins: You can begin gathering documents and prepare to file your taxes in January. The official tax season for filing typically starts the last week of January. However, it’s important to remember that employers and other entities are not required to send tax documents until January 31. If you file early, you might miss some of these crucial tax forms.
- Tax Filing Deadline: The deadline to submit your tax return for the previous year is April 15 annually unless that date falls on a weekend. If that is the case, the deadline will be the next business day (the following Monday).
CAMPUS Can Help!
Tax season often feels like a drag. From gathering documents, filing your taxes, and all the stress in between, tax time can be taxing! However, with plenty of preparation, the process should go smoothly. If you receive a refund, that could help pay down debt, boost your savings, and give yourself a well-deserved treat.
As a valued member of CAMPUS USA Credit Union, you can get exclusive savings on tax prep services and get your federal tax refund faster when you set up direct deposit.
If you have questions about having your tax refund directly deposited into your credit union account, need specific documents before you file, or want guidance on wise ways to use your refund, CAMPUS can help. Please stop by any of our convenient service center locations or call 800-367-6440 to speak with a CAMPUS Representative today.
Disclaimer: The information provided in this article is for general educational purposes only and is not intended as specific tax advice. CAMPUS USA Credit Union is not a licensed tax advisor or preparer. Please consult a qualified tax professional or the IRS for assistance with your individual tax situation or specific tax advice.
By CAMPUS USA at 25 Jan 2025, 08:00 AM