With tax season now in motion, it is smart to start planning for the April 15th deadline if you have not done so yet. This article is here to help you get prepared!
Prepare Important Paperwork
No matter who does your taxes, you will need to have all your files and forms together before getting started. Here’s a breakdown of what to prepare:
The IRS requires you to show who’s filing and who is covered in your tax return. To do that, you’ll need the Social Security Numbers and the dates of birth for yourself, your spouse, and all your dependents.
After organizing all your personal information, you can start gathering all the documents that verify the income you made in 2021. These documents can include:
- W-2 income: If you are a traditional employee, your employer will have sent you a W-2.
- All kinds of 1099 forms: Different kinds of 1099 formsreport any income you earned as a nonemployee. For example, the 1099-NEC is for contracting work, the 1099-DIV is for dividends, and the 1099-MISC is for miscellaneous income, like royalties and prize winnings. Dealing with all these forms can be confusing but getting them organized will make your tax experience much easier.
Get Your Deductions in Order
The government offers several deductions to help people lower their tax bills. If any of the below expenses apply to you, be sure to keep a good record of them. To learn more about deductions you can also read this article.
Donations For Charity
For the 2021 tax year, everyone can claim up to $300 in charitable donations on top of the standard deduction. This was originally part of the 2020 pandemic relief CARES Act, but this deduction is still around. Charitable donations that count for this deduction include cash or property, miles driven, and various other out-of-pocket costs. You will need to keep a description of what you donated, a receipt from the charitable organization, and the date and location of the contribution for any noncash donations.
Child Care Costs
Spending money on a child or any dependent adds up fast. Thankfully, taxpayers with earned income can qualify for a childcare deduction if they paid a daycare center, babysitter, or another other care provider to watch over their children under the age of 13. For one child or dependent, taxpayers are allowed to claim 50% of qualifying expenses of $8,000 for one child, or up to $16,000 for two or more children. Be sure to take note of how much you paid, the care provider’s name, address, and tax ID.
Home Mortgage Interest
This deduction lets homeowners deduct the interest they pay on any loan used to buy or improve their home. To claim this deduction, taxpayers will need records that track all the interest they have paid. Taxpayers use form 1098 to take advantage of this deduction.
Taxpayers should keep records of education expenses, like:
- Tuition and fees
- Student loan interest
- Qualified student loan
- Education expenses (For example, the cost of textbooks bought from an off-campus bookstore is a qualified education expense)
- Qualifying work-related education, such as education required by an employer or by law and education to improve or maintain skills
Non-essential fees like mileage, transportation costs, or room and rent, are not included.
Dental and Medical Costs
Qualified medical and dental expenses are ones that you have paid during the tax year for yourself, your spouse, or your dependents. You are permitted to write-off out-of-pocket payments to doctors, dentists, psychiatrists, surgeons, and chiropractors.
For the 2021 tax year, taxpayers are allowed to deduct the amount of their total medical expenses that exceed 7.5% of their adjusted gross income on their Schedule A.
Plan Your Quarterly Tax Payments
If you do freelance or independent contracting work, you may have to make estimated tax payments.
You will likely have to pay quarterly taxes if you are self-employed, and one can expect to owe at least $1,000 in taxes. This is common for small business owners, freelancers, and independent contractors.
To calculate what you will make in quarterly tax payments, add up your total tax liability for the year (self-employment, income, and any other taxes) and split the total by four.
The due dates for quarterly taxes are:
- Quarter 1 – April 15th
- Quarter 2 – June 15th
- Quarter 3 – September 15th
- Quarter 4 – January 15th
Be careful, because you may be charged an underpayment penalty if you don’t pay enough tax by the due date of each payment period (even if you’re supposed to get a refund when you file your income tax return at the end of the year).
File Your Taxes!
When you’re ready, the last step is filing your taxes with the IRS and your state. You can file your own taxes, or you can reach out to a tax professional to help you out! CKH Group is here for you, so if you need assistance with filing do not hesitate to contact us. You can reach out here to book a free consultation or you can call us at 1-770-495-9077 or email us at email@example.com!
The above article only intends to provide general financial information and is based on open-source facts, it is not designed to provide specific advice or recommendations for any individual. It does not give personalized tax, financial, or other business and professional advice. Before taking any form of action, you should consult a financial professional who understands your particular situation. CKH Group will not be held liable for any harm/errors/claims arising from the articles. Whilst every effort has been taken to ensure the accuracy of the contents, we will not be held accountable for any changes that are beyond our control.