Are You Ready to File Your Taxes?

tax time

Tax season is here and the big questions is, “Will you be ready to file your taxes on or before April 15?”

Here are some pointers to consider to help you get ready. First off, have you located all of your necessary paperwork such as

  • W-2 forms, 1099’s
  • Social Security information
  • Receipts and last year’s return
  • Other forms related to loans and your mortgage on your home.

Make sure you have all these together.

What about filing options?

Have you decided whether you’re going to go to an accountant, a tax service store or if you’re going to try to do it alone? Well, before you click on that tax preparation site or call that tax professional, here are a few things to consider.

What’s your tax objectives?

As of mid-February 2015, the IRS already issued more than $100 billion in refunds for the tax year. The majority of taxpayers usually receive a refund, and many of these individuals plan their withholding so that they strategically receive a fat check at tax time.

The remainder of American taxpayers break even or may even owe money back to the government. This happens to some self-employed individuals, some people who over-estimate their withholding allowances, and people with other income from outside sources.

Of course, taxpayers should take advantage of any and all tax benefits. But, if you have a lower income and your tax liability is easily zeroed out through basic deductions, you may want to just take the standard deduction and try to qualify for other benefits, like refundable credits (which can be added to your refund).

However, if you have a higher tax liability that’s not immediately zeroed out, you may want to compare the ins and outs of every income or tax-reducing scenario to get your liability down as much as possible.

Remember nothing stays the same

Each year, the IRS makes changes to the tax code. Of course, you’re not expected to memorize the entire code or keep track of all of the year-to-year changes. But, just because you received a refund last year,  doesn’t means you’ll receive one again this year, even if your situation hasn’t changed.

This tax year, there are multiple changes, such as the standard deduction is higher than it was last year. The income thresholds for each tax bracket have also changed, as well as the maximum earned income credit.

The Affordable Care Act impact to taxes

The Affordable Care Act, or Obamacare, has added even more variables into the tax filing ACA can impact taxpays in a few different ways, depending on which category of taxpayer you and your dependents fall into:

  • Non-ACA insured — those who have qualifying insurance may just have to check a box indicating that the ACA penalties and credits don’t apply to them.
  • Marketplace insurance buyer who took advanced credits — those who have marketplace insurance, and took advanced premium tax credits to reduce the cost of their plan, will have to make sure that their income didn’t change and everything still lines up the way it should and they don’t owe any money. Some taxpayers may even apply for additional credits at tax time.
  • Marketplace insurance buyer who did not take advanced credits — those who have a marketplace plan, and did not use premium tax credits to reduce the cost of their plan, may be able to use these credits to lower their tax liability and maybe even earn a higher refund.
  • Uninsured — finally, those who do not have private insurance, marketplace insurance, or any type of qualifying insurance at all will end up paying the dreaded fine, or they’ll have to see if they qualify for an exemption.

So, there is no need to wait until the last minute to finish preparing and filing your taxes. Get organized and get it out of the way so you’re not filing at the last minute.