No one particularly enjoys the process of filing his or her tax returns, but it is unavoidable.
Waiting until April to prepare is not recommended.
To make it less painful, start sooner, as early as February, so April 15 comes and goes without too many headaches.
Here is a checklist to help you get ready.
- Gather and organize receipts.
Shoe boxes used to be the way people stored receipts. In the age of online, paperless transactions, many of your receipts are available to download online. Gathering and organizing receipts can be as simple as creating a folder on your computer and dropping all the downloaded documents into it.
- Figure out your filing plan.
Will you file yourself or hire a preparer to do it for you? There is no right or wrong answer; it is about your comfort level with any regulatory or situational changes pertaining to your financial situation. If you are hiring a preparer for the first time, reach out to friends to get a reference for someone reputable and affordable. When you find that person or company, February is a good time to reach out and establish contact. Preparers are busy so it is important to get on their schedule as soon as you can, even if you do not have all your tax documents in hand yet.
- Electronic methods are faster.
E-filing is the way to go whether you are doing your own tax return, or someone is preparing it for you. It is always quicker, but particularly during a pandemic when the United States Postal Service has suffered from delivery delays, it is even more preferred and efficient in 2021. The same applies for receiving refund payments; utilize direct deposit. Many already do this and have received COVID-19 stimulus payments via direct deposit so the only tip associated with direct deposit is to confirm your banking information is correct and has not changed recently.
- Post-tax return questions.
Refund vs. non-refund is always an interesting conundrum. Finance professionals do not advise refunds because it is essentially an interest-free loan you have granted to the U.S. Government for the year. Whereas others prefer receiving a spring lump sum refund to apply to debt, vacation, or other expenses. If you are not happy with your refund or non-refund status from 2020, the best time to review your exemptions is as early as possible in 2021. Obviously, the earlier you make a change, the more it will impact your 2021 return.
From all of us at Insurance Freedom Associates we hope you remain safe and healthy as we venture through this first quarter of 2021, as always, we are here and ready to assist residents of Danville, Lewisburg, Milton, Norry, Selinsgrove, and the surrounding area with all their home and car insurance needs.
