It's Tax Season....... Almost!

Tax season often brings stress and additional paperwork, crucial deadlines, and several decisions to make. Even if your financial situation remains unchanged, preparing in advance can simplify the process and reduce stress.

Try the following tips to help you stay organized, avoid common errors, and approach filing with greater confidence. NOTE: Remember, the best plan is to contact your tax preparer and confirm what they need before filing.

1. Organize Before You Begin

   • Before you start using tax software or meeting with a professional, collect all your documents in one place. Business and Personal. These might include:

   • Business

     • Business loan interest statement

     • Investment or savings account tax forms

     • Records of charitable donations

     • Bank statements

     • Business Credit Card statements

     • New assets purchased during the year

     • Prior year tax returns

     • Employee payroll reports

     • Employee benefit payments (retirement, etc)

     • Business Profit & Loss Statement

     • Business Balance Sheet

     • Business Trial Balance

     • Business receipts

   • Personal

     • Personal W-2s or 1099s

     • Mortgage interest statements

     • Student loan interest statements

     • Investment or savings account tax forms

     • Records of charitable donations

     • Prior Year tax records

   • Having everything ready can save time and prevent mistakes that could delay your refund.

2. Be Aware of Important Deadlines

   • While most people know the tax filing deadline, other deadlines are easy to miss.

     • Filing deadline: Typically April 15

     • Estimated tax payments (if applicable): Quarterly

     • Extensions: An extension gives you more time to file, not to pay

   • Missing deadlines can result in penalties and interest, so it's important to note key dates on your calendar.

3. Verify Your Personal Information

   • Simple errors can cause delays. Before submitting your return, check:

     • Social Security numbers are correct

     • Names match official records

     • Bank account and routing numbers are accurate if you're expecting a refund

   • These small details can significantly impact how quickly your return is processed.

4. Understand Credits vs. Deductions

   • Both credits and deductions reduce your tax bill, but they function differently.

     • Deductions lower the amount of income that is taxed

     • Credits reduce your tax bill dollar for dollar

   • Common credits include child-related and education credits. Understanding the difference can help you make informed decisions when filing.

5. Be Wary of “Too Good to Be True” Offers

   • Scams increase during tax season. Be cautious of:

     • Emails or texts claiming to be from the IRS

     • Promises of unusually large refunds

     • Requests for personal or banking information

   • The IRS does not initiate contact through email, text, or social media. If something seems suspicious, take a moment before responding.

6. Select the Appropriate Filing Method

   • There is no universal approach to filing taxes.

     • Online tax software may be suitable for simple returns

     • A tax professional can be beneficial for more complex situations, such as self-employment, small businesses, investments, or major life changes

7. Plan for Your Refund

   • If you expect a refund, consider how you will use it. Options might include:

     • Building or adding to an emergency fund

     • Paying down high-interest debt

     • Saving for a short-term goal

     • Making a principal payment on a loan

   • A refund can be a great chance to improve your financial situation.

8. Review Your Withholding for the Next Year

   • Withholding is the federal income tax deducted from your paycheck and sent to the IRS throughout the year. This helps cover your tax bill gradually, rather than paying it all at once when you file.

   • If you owed more than expected or received a much larger refund than planned, it may indicate your withholding is off. Reviewing it now can help prevent surprises next tax season and align your take-home pay with what you actually owe.

9. Keep Copies of Everything

   • Once your return is filed, save copies of:

     • Your tax return

     • Supporting documents

     • Confirmation of filing

   • Keeping records simplifies future filings and is helpful if questions arise.

10. Seek Clarification When Needed

    • If you're uncertain about something, consult a trusted professional or look for reliable resources. Taking time to understand your situation can boost your confidence and control.

If this seems overwhelming, contact Two Branches Consulting, LLC. We will take that shoebox of receipts and compile them into usable financial reports to save you time and stress this tax season.