Tax season is on the horizon and before we dive into the bells and whistles of the new tax code, let’s look at how to prepare. Prepping for tax season can be just as important as the actual act of filling out forms and sending them in to be filed. Tax prep should include both research and the act of getting your paperwork together.
-Gather the Necessary Paperwork
The most time-consuming part of tax season is gathering the necessary paperwork. You have your W-2s, business expenses you want to write off, and numerous other forms to be sent off before you can even think of tax refunds. Therefore, the first step you should always take in preparing for tax season is to start the process in the beginning of the year so you are not scrambling when the deadline comes around.
-What’s Your Tax Bracket
One change caused by the new tax code that you need to research before filing your taxes is the new tax bracket. While there are still seven tax brackets that you can fall into, the individual rates are now lower than before. The new rates are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. These rates may affect what you get back or have to pay once you have filed your taxes so it is important to do a little research before you start.
-To Itemize or Not to Itemize
Another change in the tax code is the effect of itemizing your taxes. In the past, small business owners or those who are self-employed would itemize their deductions to reduce what they may owe the IRS or get reimbursed. However, now that the deduction rate has raised with the new tax code, itemizing your deductions may harm you overall. It’s still worth itemizing such as medical expenses, charity contributions, mortgage interest, and loses from the many storms in 2017. However, do your research to know what you need and what you shouldn’t itemize this year.
With all the changes coming this tax season, it’s important to know your approach to filing your taxes. Will you be using a tax software or website to streamline your tax filing at home? Or will you be hiring an accountant or financial advisor to help you through the process and personalize the tax process? Figure out your process and create a game plan so you can get the fullest out of tax season.