The holiday season is fast approaching, and before you know it, 2019 will have come to a close. Tax season for preparing your 2019 tax return won’t be far behind, with a typical start coming in late January. To be ready — and to save as much as you can on your taxes — it pays to get ready early.
The IRS knows how important it is to get ready for tax season before it comes, and officials at the tax agency recently shared some ways that you can get a head start on things before you file. In particular, the following items are must-dos to put yourself in the best possible position come January.
1. Make sure you’ve paid enough tax so far
The IRS generally expects that you’ll have paid most of your total tax bill prior to filing your return. For most people, taxes that get withheld from paychecks are enough to cover the amount of tax you owe and often leave something left over for you to get back as a refund.
In addition, if you get a lot of income from sources other than an employer, whether it’s from a business, investments, or other sources, any withholding you might have might not be enough to cover taxes.
If you don’t take care of that, you can end up not only with a big tax bill, but also owing penalties.
There are a couple things you can do to fix the situation.
If you’re an employee, you can talk to your HR office about boosting the amount you have withheld to cover any extra tax liability.
If not, then you can make quarterly estimated tax payments to make up the difference. Either way, making sure you pay the required amount of tax at the appropriate time will help you avoid any extra trouble from the IRS.
2. Get your tax records and documents together
You won’t start getting tax information like a W-2 wage statement or 1099s from investment accounts for the 2019 tax year until well after 2020 begins. But you can get ready for that onslaught of tax information by making sure that your address is correct with your employer and investment providers. That’ll ensure forms come on time, letting you prepare your return more quickly.
Looking over your old tax records to see who’s sent you materials in the past can give you a checklist you can use throughout tax season to make sure you’ve gotten everything you expect before you file.
3. Renew expiring tax identification numbers
Most taxpayers use their Social Security numbers throughout their lives to file their taxes, but some who don’t qualify for Social Security numbers have to get an individual taxpayer identification number, or ITIN. These numbers expire in groups, with those whose middle digits are 83 through 87 expiring at the end of 2019. ITINs also expire if they haven’t been used on a tax return in the past three years.
If your ITIN is expiring, you can file Form W-7 now to renew it. It typically takes anywhere from seven to 11 weeks to go through the process once you’ve submitted the required form. The sooner you start, the sooner you’ll have a number that’ll help you get your return filed.
4. Get ready to file and get your refund electronically
Every year, the IRS pushes its automated services, and the vast majority of taxpayers now use them. Electronic filing is fast, secure, and helps boost accuracy and ease of preparation. Using direct deposit to have refunds put directly into your bank account makes sure that you’ll get your refund money more quickly, as well.
Free electronic filing programs exist for taxpayers with incomes below $66,000. Direct deposit is available to anyone with a bank account. With longer delays for paper return processing and refund-check delivery, it generally makes more sense to use e-filing and direct deposit if at all possible.
Tax season is coming!
Getting a head start on tax season might not sound like the ideal way to spend your time as 2019 draws to a close. But it’s time well spent and could help you avoid some surprises you’d just as soon not have to deal with in the future.
— Dan Caplinger
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Source: The Motley Fool