As tax season rolls around, so do some of our favorite tax jokes (since they can sometimes seem so fitting)(1)
Nothing makes a person more modest about their income than to fill out a tax form.
Golf is a lot like taxes. You drive hard to get to the green and then wind up in the hole.
Children may be deductible, but they are still taxing.
These (among others) can certainly make us chuckle, but when it comes down to actually filing your own taxes, it can get serious quickly. With so many different rules, scenarios and terminology, it can feel daunting to navigate the world of taxes. It’s important to be knowledgeable and leverage your resources to ensure you’re approaching this important task correctly:
It’s Tax Time – let’s get the facts straight (2):
Timing is key: the deadline to submit your tax return or file an extension with the IRS is Monday, April 15th. The sooner the better to get your taxes filed to avoid any unexpected delays or surprises.
You should have received all your tax documents by early February. If you didn’t, check with your employer or online. This may include a W-2 if you’re an employee or 1099 forms if you’re a freelancer or independent contractor. Depending on your situation, you may also have other statements or documents.
Is there anything different this year?
Yes. You probably remember hearing President Donald Trump changing the US tax code (for the first time in 30 years) back in December 2017. This includes new tax brackets and modified tax deductions, which went into effect for the 2018 tax year.
What else should I know?
Some people have a love/hate relationship with their taxes. For some, you may receive a nice refund back and a little extra boost for you to spend on anything from vacations to home repairs. But what that really means is that you just gave Uncle Sam an interest-free loan for that amount for months instead of withholding it from your paychecks.
On the other hand, some may owe money. If this is you, don’t freak out. Instead look at it this way, the government had it coming their way sooner or later and that money owed will eventually be due. If you do owe taxes and can’t afford to pay your tax bill entirely, the IRS offers payment plans at much lower interest rates than some banks or credit card options. If you find yourself in this situation, make sure to understand all your options before making a decision.
Remember, the ideal balance is to avoid a refund and owing anything at all. Speak with your employer’s human resources department about modifying your withholding amount per pay period to fine-tune how much in taxes you’re paying per pay period. Especially with the new tax bill in effect, the IRS strongly encourages taxpayers to check their withholdings early in 2019 to help avoid an unexpected tax bill come tax time the following year. There are online calculators that can help you review your tax withholdings.
Once you’ve filed your taxes and either received your refund or paid what you owe, don’t forget to keep records of all your old tax returns for at least 3 years (some even recommend 5 years). This accounts for the length of time the IRS may look back if you happen to get audited. When the time comes to get rid of old tax returns, make sure to properly shred the documents and dispose carefully to avoid personal information getting in the wrong hands and potentially falling victim to identity theft.
Unless you’re a tax professional, it’s recommended you get some help along the way. Even the do-it-yourself online options like TurboTax will keep you on track and help you remember what you may owe taxes on. It may be more beneficial to pay a little more for that in-person talk with a tax advisor. You probably have more questions than you realize about just what you need to declare to the IRS. Did you hit it big on the slots machine back in the summer during that weekend trip to Vegas? Or do you recall throwing some money around during that Bitcoin craze at the start of the year? You may be wondering how you treat those gambling winnings or losses in cryptocurrencies. Are they taxable events, and how do you keep track of offsetting the gains with your losses? A live tax professional is probably better-equipped to answer any questions you have than just trying to figure your way through an online tax service.
Be Aware: Tax Fraud
Tis the season to be on high alert and on the lookout for any tax fraud crimes. Fraudulent tax returns can happen with simply a stolen social security number. There are unfortunately many different ways tax fraud can creep up so be sure to keep your information safe and be aware of any suspicious activities.
Taxes are no joke. That’s why a strategic plan can make all the difference between saving money or needing to owe. Take the time to ask the right questions so you can feel confident in filing your taxes. Since they aren’t going anywhere, it’s best to get on the right track now to set yourself up for success this year and into the future.
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Happy Tax Time!