As tax season approaches, it can be a challenging task to navigate the complexities of preparing for tax filing, regardless of whether it's your first time or you have experience in the matter. Jefferson Bank has valuable pointers to assist you in navigating the tax season with ease. Our aim is to demystify the process, transforming what may seem like a tedious chore into a manageable journey. We encourage you to prepare now to confidently and adeptly tackle the upcoming tax season.
Who Needs to File Taxes?
Let's explore how to prepare for tax season and understand who needs to file. If you're earning above certain income thresholds, you will need to file your taxes. Here's a quick peek at the filing requirements for those under 65 as noted on the IRS website:
- Single, earning $13,850+ annually
- Head of household, earning $20,800+ annually
- Married filing jointly, earning $27,700+ (both spouses under 65) or $29,200+ (one spouse under 65)
- Married filing separately, earning $5+
- Qualifying surviving spouse, earning $27,700+
Falling into any of these categories means you're on the IRS's list of required filers. Understanding these thresholds isn't just about staying out of trouble; it ensures you're in compliance and helps you avoid any potential penalties. Being informed is the first step to confidently conquering the tax season.
Getting Started with Tax Season
Getting ready for tax season? It’s all about preparation! Being organized not only helps you stay accurate but also makes the whole process far less stressful. Here’s how to tackle it:
- Know Your Status: Your filing status isn’t just a label; it affects your tax bracket and eligibility for deductions and credits. Are you single, head of household, married filing jointly, married filing separately, or a qualifying widow/widower with a dependent child? Picking the right status can optimize your tax situation.
- Keep Your Info Fresh: Make sure to keep your name and address updated with the IRS to avoid processing delays caused by outdated information, especially if you've moved or changed your name.
- Get Your Docs in a Row: You’ll need last year’s tax return, W2s, 1099s, Form 1098, or Form 1099-DIV. Don’t forget deduction-related forms like Form 5498 and Form 1095-A. Being organized here means a streamlined filing process later.
- DIY or Pro Help: Decide whether to use tax software on your own or hire a tax professional. Doing it yourself can save money, but a professional may find more deductions and credits for you.
- Boost IRA Contributions: Lower your taxable income with IRA contributions. Reap all the tax benefits by maxing them out before the April 15, 2025, deadline. The maximum contribution for the 2024 tax year is $7,000 for individuals under 50 and $8,000 for those 50 and older.
- Consider an Extension: Need more time? Filing an extension gives you an extra six months to get everything in order. But remember, this doesn’t postpone any tax payments due.
- Fine-tune Your Withholding: Adjust your W-4 form if needed. Ensuring you’re not underpaying or overpaying avoids surprises during filing.
In the end, being tax-savvy isn’t just about crunching numbers. It’s about setting yourself up for success and finding peace of mind along the way.
Use our quick reference guide provided at the end of this blog to understand filing status and commonly needed IRS forms.
Your Life Stage Could Equal Credits or Deductions
Navigating how to prepare for tax season doesn't have to be a nightmare. Understanding how different life situations affect your filing can make things a whole lot easier.
- Students: If you're hitting the books, you might snag some sweet education credits like the American Opportunity Tax Credit or the Lifetime Learning Credit. Keep those tuition payment receipts and Form 1098-T handy—they're your ticket to lightening your tax load.
- Military: For military personnel, unique tax perks, from combat pay exclusions to moving expense deductions due to orders, are available for your tax return. Get to know these benefits, and you might secure more savings during this tax season.
- Employees: It’s key to keep tabs on your W2s and any relevant 1099s. Remote workers, don't forget to include those handy work-related deductions for your home office setup. These can make a big dent in your tax bill, so don't miss out!
- Parents: For parents, you've got credits up for grabs, like the Child Tax Credit and the Earned Income Tax Credit. Keep all your children’s important documents, like birth certificates and Social Security numbers, handy. These credits can mean serious savings—get organized and cash in!
- Seniors and Retirees: Seniors are eligible for extra credits and deductions, especially when it comes to retirement income from Social Security and pensions. Don’t forget those medical expenses—every bit helps. Review your options to get the most out of your filing.
Understanding these scenarios and their tax perks can simplify your filing process and save you money. For personalized advice, speak with a tax advisor.
Ways to File Your Taxes
Here are some popular methods to make the process smoother:
- IRS Website: For those who like going straight to the source, the IRS website offers free filing options for eligible folks. It's a reliable way to file directly without any middlemen trying to sell you anything else.
- Tax Preparation Software: Software tools like TurboTax and H&R Block are like your digital tax sidekicks, guiding you through filing with step-by-step instructions and error checks—think of them as the GPS for your tax journey.
- Tax Professional: If your tax situation feels more like a complicated puzzle, calling in a tax professional might be the way to go. They can offer personalized advice and help you squeeze out every possible deduction and credit.
- Paper Forms: For the traditionalists at heart, paper forms are still an option. Just make sure you double-check those entries before mailing them off to Uncle Sam.
No matter which method you choose, remember to get organized and understand your options so you can conquer this tax season with confidence.
Understanding Credits and Deductions
Tax credits reduce the amount of tax owed, while deductions lower your taxable income. Familiarize yourself with both in order to maximize your savings.
Claiming Credits
To claim credits, complete the necessary forms and submit them with your tax return. Common credits include the Earned Income Tax Credit and the Child Tax Credit.
Deducting Expenses
You can deduct these expenses whether you take the standard deduction or itemize:
- Alimony payments
- Business use of your car and home
- IRA contributions
- Health savings account contributions
- Penalties on early withdrawals from savings
- Student loan interest
- Teacher expenses
- For some military, government, self-employed and people with disabilities, work-related education expenses are also deductible, along with moving expenses for military service members.
- Per the IRS website, if you itemize, you can also deduct the following expenses:
- Bad debts
- Canceled debt on home
- Capital losses
- Donations to charity
- Gains from sale of your home
- Gambling losses
- Home mortgage interest
- Income, sales, real estate and personal property taxes
- Losses from disasters and theft
- Medical and dental expenses over 7.5% of your adjusted gross income
- Opportunity zone investment
How to Prepare for Tax Season with Jefferson Bank
Preparing for tax season doesn’t have to be stressful. By understanding the requirements and staying organized, you can ensure a smooth and accurate filing process. Whether you are a do-it-yourselfer or working with a tax professional, we hope this information will ease some of the tension that comes along with this task.
While we can’t file your taxes, we’d love to be your partner in building your financial future. Explore our website to learn more about the many products and services we offer.
For specific tax preparation questions, consult your tax advisor.
