If you’re like many Americans, you dread putting together the documents and filling out all the required forms to file taxes. But if you’re anticipating a refund this year, all of those headaches might be worth it in the end!
Of course, the best way to get ready for tax season is to prepare well in advance so you’re not stressed out at the last minute or faced with fines for late filing.
When Is Tax Season?
As professionals who work in the financial industry will tell you, tax time isn’t just a day, it’s an entire season. This season runs between January 1 and April 15 each year and is defined as the period of time that individuals in the U.S. prepare their financial statements and reports for the previous year.
In 2016, the deadline for taxes is actually Monday, April 18 rather than the traditional April 15 date. This is because Emancipation Day is an official public holiday celebrated on April 15, 2016. Taxpayers in the states of Maine and Massachusetts have until April 19, 2016 to file their taxes because of the statewide legal holiday of Patriot’s Day, which is April 18.
Income Tax Preparation
Preparing for tax season is all about having the necessary documents on hand. Watch your mailbox during the months leading up to the tax deadline and carefully secure all tax-related documents together in a folder or envelope.
You will need to decide whether to hire a tax professional to do your taxes or whether you’ll try to do them yourself using a tax software program. This is the time to start thinking about changes that may affect your filing status, such as a marriage, divorce, birth of a baby, or adult child now filing on his own.
Also, contributions to an IRA can impact the amount that you owe in taxes, so consider making a contribution to save yourself money now and plan for your retirement years down the road.
Small Business Tax Preparation
If you own your own company, you will have to deal with small business tax preparation in addition to your personal income tax. Many small businesses outsource their tax preparation; however, others have a reliable in-house accountant to handle the company’s finances.
For small businesses, it’s a smart idea to keep financial records up-to-date all throughout the year, rather than scrambling to put everything together at the last minute. Small businesses are often eligible for deductions and tax credits, so make sure to take advantage of as many as you legally can.
“Ghost assets,” which are assets that can’t be accounted for because they’re physically missing or unusable, can also impact small business tax returns. This is why it’s so important to have an efficient and reliable inventory management system.
As you prepare to do your taxes, there are certain documents and pieces of information that you will need to locate and bring with you. Here is a basic checklist for tax prep to get you started.
- Personal information for you, your spouse, and dependents
- W2, 1099-MISC, and other employment forms
- Education payments
- Business vehicle information
- Rental property income
- IRA, pension, social security, and annuity income
- Savings and investment information
- Income from unemployment, gambling, alimony, and awards
- Affordable Care Act health insurance information
- Deduction and credit information
- Amounts of taxes you already paid during the year
- Last year’s filed tax return
*Novation is not a financial advisor and/or consultant and strongly recommends that you speak to a lawyer and/or accountant before making any significant financial decisions.