Tax Preparations

Certain tax preparations are needed whether you do it yourself or hire a tax professional. You will need certain information and documents to file your tax return. Here’s a tax prep checklist most taxpayers might need to complete the job.

Tax Preparations the Basics

tax preparationsStarting out you will need Social Security numbers for yourself, your spouse and all dependents. Remember, in addition to children, dependents can include elderly parents and others.

Income Information

  • W-2 forms. Employers are mandated to issue these no later than January 31, watch your mail for these important documents.
  • 1099 forms. Depending on the type of payment you received each type od 1099 has a different suffix. For example, form 1099-MISC is for contract work. If you’re paid via a third party such as PayPal or Amazon, you’ll likely get a 1099-K.

Popular Tax Deductions

  • Medical bills. Medical costs could provide tax savings, but only if they total more than 10% of adjusted gross income for most taxpayers.
  • Property taxes and mortgage interest. If your mortgage payment includes an amount escrowed for property taxes, that will be included on the Form 1098 your lender sends you. That document will also show how much home loan interest you can claim on Schedule A.
  • Charitable donations. To ensure your generosity pays off at tax time, keep your receipts for charitable donations. The IRS could disallow your claim if you don’t have verification.
  • State and local taxes. You can deduct various other taxes, including either state and local income or sales taxes (up to $10,000, including property taxes). You don’t need receipts for the sales tax; the IRS provides tables with average amounts you can claim. The tax on a major purchase, however, can be added to the table amount, so keep those receipts.
  • Classroom expenses. If you’re a school teacher or other eligible educator, you can deduct up to $250 spent on classroom supplies.
  • Educational expenses. Students can claim a deduction for tuition and fees they paid, as well as for interest paid on a student loan. The IRS won’t accept your deduction claim without Form 1098-T, which shows your education transactions. Form 1098-E has details on your student loan.
  • Retirement account contributions. You can deduct contributions to a traditional IRA or self-employed retirement account. Just be sure to stay within the contribution limits.

Other Deductions – Credits

Here are some popular tax credits:Other Deductions – Credits

  • American Opportunity and Lifetime Learning credits. These education-related credits can save you quite a bit of money. As with the tuition and fees deduction, Form 1098-T is required to claim either.
  • Child Tax Credit. The standard Child Tax Credit is worth up to $2,000 per child dependent. If you added to your family through adoption, you might be eligible for additional tax credits.
  • Retirement savings contributions credit (also known as the Saver’s Credit). Contributions to a 401(k), similar employer-sponsored plan or an IRA might allow you to claim this credit.

The above list covers basic preparation issues common to most filers, but taxes are different for each of us. Having a professional assist you in your tax preparations can sometimes find money that may be owed by you. A good tax pro can quickly tell you if it’s worth your time and money for professional service.

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