Welcome to tax season! Yes, it is only February but it’s never too early to get your ducks in a row. The sooner you get prepared, the less stress you’ll find when April 15 rolls around.
Here are the top four tips to stay on track with your 2019 taxes.
1- Know your deadlines
Stay ahead of the game. Know when you need to submit your taxes to avoid surprises or late penalties.
|Return Type||Deadline Date|
|Individual : Form 1040||April 15|
|Partnership : Form 1065 |
S corporation : Form 1120S
|C corporation: Form 1120||April 15|
|Trust and Estate : Form 1041||April 15|
|Estate Tax Return : Form 706||Due within 9 months after the date of the decedent’s death|
|Exempt Organization : Form 990 (series)||May 15|
|Employee Benefit Plan : Form 5500 series||July 13|
Note: If the due date falls on a Saturday, Sunday or legal holiday, the deadline is moved to the next business day.
2 – Know what has changed
Take time to find out what has changed in the tax rules to help you better prepare and understand how it will affect you.
For the tax year 2019, the biggest change is the increase in the standard deductions:
|Single or married filing separately:||$12,000||$12,200|
|Married filing jointly or qualified widow(er):||$24,000||$24,400|
|Head of household:||$18,000||$18,350|
Another change for the tax year 2020 is that the individual contributions increased for 401K retirement accounts.
The Flexible Spending Account (FSA) limit has also increased for 2020 to $2,750, up from $2,700 in 2019. Remember that this is use-it-or-lose-it money. Contribute a set amount per paycheck and use the funds for medical expenses like contact lenses, first aid kits, chiropractic care, dental work, physical therapy, over-the-counter medication, humidifiers, braces, and copays/deductibles.
If keeping up with all the changes is quite tough for you, either hire a tax preparer to help you with your taxes or use tax software.
3 – Leave plenty of time
Start collecting documents in sorting files sooner than later. By February, you need to start compiling all your W-2, 1098 or 1099 forms. This should have been received by January 31st.
If something is missing, you’ll have ample time to track it down, instead of rushing last minute.
4 – Determine your filing system
Whether you put your papers and receipts in a shoebox or input them in a bookkeeping system, it is important to find a way that works for you in terms of filing and keeping your business records.
One way would be to keep a container with labeled folders, such as:
- Home and Office expenses
- vehicle and mileage cost
- child care expenses
- education cost
- medical expenses
You can also upload digital documents to a secure digital platform, such as Dropbox, Google Drive, or The Vault. Be sure to keep a backup on a hard drive or thumb drive.
Taxes can be a huge pain point, but it doesn’t have to be. Follow the tips above and you’d be in good shape with sanity intact during tax time.