Time to prepare for tax season

Now is the time to begin preparing for tax season

With the rush of the holiday season over, thoughts now turn to the next daunting task for many people – preparing to file income taxes for the past year. Although the tax deadline is still several months away, by starting to prepare now, you may find it less painful when it is time to send off your payment or submit the documents for your refund.

“Now is the time to begin organizing your tax records,” the Internal Revenue Service advises. “Having organized records makes it easier to prepare a complete an accurate tax return. It also helps avoid errors that can slow down refunds while also helping find overlooked deductions or tax credits.”

One way to help organize yourself prior to tax time is to create a checklist that will help you gather all the documents you need. Some of the items to add to the checklist include statements you receive in January and February, and this includes any you receive electronically. If you have not tracked them throughout the year, locate documents for charitable donations, costs for healthcare, property tax documents and any losses or winnings from gambling.

During the month of January, you will likely receive multiple tax documents, including W-2 forms, 1099s, mortgage interest statements or student loan reports. Be sure to place those in a file that will be easily accessible at tax time. If you prefer, you can scan them into an electronic version and save them to a computer or an online storage system.

Gather receipts for any tax deductible expense, especially if you operate your own business. Group them together to make it easier to track when completing tax forms. If you are using a professional tax preparation service, having all your information organized and in one place will make the process go smoother for them and could result in your tax returns being completed faster.

If you plan to file without a professional, be sure to use the correct forms as using the wrong forms can delay your return. The Internal Revenue Service has forms available online for download or you can use an online tax preparation service like TaxAct or TurboTax.

The federal government deadline for filing is April 15, but experts remind everyone that they do not need to wait until that deadline to complete their tax returns. Many who believe they will owe a balance to the government feel they should wait until the deadline, but you can prepare the forms at any time and simply send the payment off closer to April 15. As long as the payment is postmarked before midnight on April 15, you should not incur a penalty, however, it is best to send the payment before the deadline to guarantee you are not penalized. If you will be unable to file your taxes before April 15, submit Form 4868 before that date in order to obtain an extension until October 15.

The deadline to file Delaware state taxes is April 30, 2024. All personal income tax refunds will be held until February 15 in an effort to reduce income tax fraud. According to the Delaware Department of Revenue, the state will begin processing returns on January 23. Both the state and federal government recommend filing as early as possible as another way to avoid becoming a victim of income tax fraud as once your social security number has been used to file a return, a second return cannot be filed by a criminal.

Filing electronically is the best way to file if you are expecting a refund. Electronic returns are processed faster than paper returns which means your refund will be sent sooner. The IRS reports that less than one percent of electronically filed forms have errors compared to 20 percent of paper returns. Choosing direct deposit is also the best way to get your return quickly. Keep in mind that if you are filing jointly, the deposit will be sent with both names. If both names are not on the bank account you choose for direct deposit, the bank can reject the refund, so be sure that both names appear on the account you plan to use.

Also keep in mind that all income is taxable, including “side hustles.” For example, if you sell items at craft shows, the income from those sales is taxable. However, you may also have additional deductions for a small home business. Unemployment benefits are also taxable and must be reported on your income tax return.

By following these simple tips and getting a head start on tax season, you may find that it is less stressful and you could even find additional savings by taking your time and not rushing to complete your returns.