Every year, 10 million or more individual filers ask for an extension on their tax filing date. That’s 10 million people who, for one reason or another, weren’t able to file their taxes before April 15th. In order to avoid becoming one of those people, don’t wait until the last minute to try to do your taxes. You may realize that you’re missing an important document and don’t have enough time to obtain it.
Whether you’re planning on self filing or working with a professional tax preparer, gathering all of your documents up front will make the process much smoother.
Many of the documents you need, such as W-2s and student loan interest statements, will be sent you you via regular mail or email. But depending on your individual tax situation, you may also have to track down receipts for items such as medical expenses, business expenses, or charitable donations. Make sure you have a clear understanding of what your tax situation involves, and get organized by adding these five items to your tax preparation checklist.
Must-haves for your tax preparation checklist
1. Itemized deductions
You will have to decide whether you’ll want to make any itemized deductions. If you have a side gig, travel for work, or have a lot of medical expenses, it may make sense to itemize these expenses instead of taking the standard deduction.
For 2017, the standard deduction is $6,350 for single taxpayers and married couples filing separately, and $12,700 for married couples filing jointly. To decide if you should itemize deductions, you need to determine if your allowable expenses exceed this amount. Saving your receipts in a designated file throughout the year will make this easier, but if you haven’t done this, look back over your bank statements and credit card statements and make a note of anything that can be itemized.
For medical expenses, you may only deduct unreimbursed expenses that exceed 7.5% of your Adjusted Gross Income. You may also be able to deduct expenses such as tools and supplies purchased for work and certain educational expenses.
2. Business expenses
Self-employment typically involves a lot of business expenses, even if you work from home. Fortunately, you can deduct many of these expenses from your total income.
If you have a home office, you can deduct this as a business expense, but there’s a catch: your office has to have a door and can’t be used for any other purposes. You can also deduct a portion of any utilities that are shared between the home and the business, such as your internet and cell phone. Any work-related travel is also an allowable expense.
You need to keep receipts in case of an audit, so store digital and print copies of everything just to be safe. Self-employed individuals are more likely to be audited, especially if you tax return contains certain red flags, like large deductions for travel and entertainment, so make sure your records are meticulous.
3. Donations and dues
If you’re part of a union or other professional organization, you can deduct your dues from your income earned. The same thing goes for charitable donations.
Usually, you’ll get something at the end of the year thanking you for your contribution and showing you how to enter the information on your taxes. This should arrive in the mail by February.
4. Health insurance forms
You can expect to receive a form from your health insurance provider confirming if you had minimum qualifying health insurance for all or part of the year. Individuals without the minimum essential health coverage may have to pay a penalty.
If you are enrolled in a health insurance plan through a state or federal exchange, you should also receive Form 1095-A, which you will need to calculate your health premium tax credit amount.
5. Interest statements
If you’re paying for student loans like 40 million other Americans, you can deduct your student loan interest. Watch for your form 1098-E to arrive in the email, or you may be able to download it from your student loan lender.
If you own a home, your mortgage interest may also be deductible. Your lender should send you a document if you paid at least $600 in interest last year. It may be attached to your monthly statement, so check any correspondence carefully.
Make note of important dates
Employers, banks, and other institutions should have mailed any documents to you by January 31. Since documents are often sent electronically, be sure to check your email as well as your mailbox. If you’re expecting a form that you haven’t yet received, don’t hesitate to reach out to the appropriate party so you can gather all the information you need well before the filing date. Don’t forget about any previous employers or others you may have done business with over the past year.
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