5 Questions You Should Ask Yourself Before You File Your Taxes – Part 2

What documents do I need to get started?

Whether you decide to do this on your own or decide to hire someone to help with your tax filing, you’ll need to gather important information and documents first. What you will need varies, depending on your tax situation. Here is a link that provides an overview of most tax documents:

https://www.thebalance.com/what-forms-do-i-need-to-file-my-taxes-2385783

 

Have there been any significant changes in my life over the past year?

Have you gotten married, divorced, had a child, gone to college, bought a house, changed jobs, started providing significant care for a relative, or started a business? These are all major life changes that impact your tax filing (and there are even more than are included here). It may be helpful to complete a mental checklist of what has changed before you get started with filing your taxes so that you can make sure you have all the information you need to complete your tax return accurately.

 

What credits or deductions do I qualify to take?

Again, this one depends on your situation. (And Congress is constantly changing these!)  Here are a few links of some common and not-so-common current (2020 /2021) tax deductions and credits you may qualify for in various circumstances. Tax credits are usually more valuable and harder to qualify for than deductions since they directly reduce the amount of tax owed (where deductions simply reduce how much of your income is subject to taxes). Keep in mind, some deductions and credits are dependent on your income so if you make too much, you may become ineligible. As mentioned above, these are constantly changing, so check back to see what you may qualify for in the future.

https://www.nerdwallet.com/article/taxes/tax-deductions-tax-breaks

https://www.nerdwallet.com/article/taxes/self-employment-tax-deductions

 

Should I update my withholding?

Once you have finished filing your return, it is a good opportunity to make note of whether you have a huge tax bill or a huge refund – neither are particularly ideal. To avoid surprises, the IRS’s withholding calculator can be a helpful resource in determining the amount to withhold from your paychecks. You will need your most recent paystub and to answer a few questions about your filing status. It takes the guesswork out of updating your withholding and they tell you exactly what you need to change if you want a bigger or smaller refund in the coming year.

https://www.irs.gov/individuals/tax-withholding-estimator

 

Additional Resources:

https://www.hrblock.com/tax-prep-checklist/what-do-i-need-to-file-taxes/

https://blog.taxact.com/tax-planning-for-working-millennials/

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