Didn’t Prepare for Your Taxes Very Well Last Year? Here’s What to Do Now

If you’re like many taxpayers, you may have waited until the last minute to prepare your taxes last year. While it feels great just to get them done and out of the way, you may have missed some things in your haste that could have produced a better outcome or increased the chance of errors.  It can be different this year. All it takes it a couple of hours (at most) of organization that will enable you to prepare and file your returns more quickly and accurately.

Use this as your annual tax preparation checklist to save time, effort, and money.

Gather Your Personal Information

Your best source for your personal information is last year’s tax returns. They have Social Security numbers for you, your spouse, and your dependents. Note any changes that need to be applied to this year’s returns, such as additional dependents or an address change. They’re also good as a starting point for identifying all your deductions and credits.

Gather Your Income Documents

W-2 forms. You should receive your W-2 form by January 31, either through the mail or electronically.

1099 forms. You should receive a 1099 form for various sources of income, including 1099-MISC for any contract work you’ve done, 1099-K for income received by third parties, such as PayPal, 1099-INT for interest earned, and 1099-DIV for any dividends received.

Letter 6419-Advanced Child Tax Credit. If you received advanced child tax credit payments, you need to compare the amount you received during 2022 with the amount you are allowed to claim on your 2022 return. If you received less than the amount you are eligible for, you can claim a credit for the remaining amount on your return. If you receive more than you’re eligible for, you may need to repay all or a portion of the excess amount.

Gather Records and Receipts for Deductions

Generally, you can only claim deductions if they can be documented. This can be the most time-consuming part of tax preparation, but it can be worth it if it means lowering your tax bill. Unless you think your total deductions will exceed the standard deduction ($12,950 for individuals or $25,900 for joint filers in 2022), you don’t have to worry about itemizing your deductions on Schedule A. If your total deductions were close to the standard deduction last year, it may be worth running through them this year to see if any additional deductions could bring you over the top.

One place to look for additional deductions is with sales taxes. While you don’t need to keep sales receipts for claiming the standard sales tax deduction (based on IRS formulas), any sales taxes paid on large items, such as a car, home renovation, appliances, can be claimed on top of that.

A note regarding charitable deductions:The charitable deduction limit increase allowed under the CARES Act is no longer available for 2022. That means you can claim charitable giving deductions up to 60% of your Adjusted Gross Income (AGI) on cash donations.

As always, your charitable contributions must be documented to claim them.

In addition, the above-the-line deduction for charitable deductions allowed under the CARES Act is also no longer available. In 2022 you can only claim charitable deductions if you itemize using Schedule A,

Other above the line deductions that can be claimed even if you don’t itemize:

• IRA contribution
• Health savings account contributions
• Self-employment expenses
• Moving expenses for military members
• Student loan interest payments
• Educator expenses

Estimated Tax Payments

If you make federal estimated tax payments, have your record of payments handy.

The tax preparation checklist may apply to most taxpayers, but every situation is different. If you are a business owner, you will need to follow most of the same steps in preparing to file your Schedule C. By taking the time and effort to thoroughly prepare for filing, you’ll cut down on the time involved in completing your taxes online. If you file your taxes with a tax preparer, you’re likely to save on fees.