Though 2018’s tax return due date is still several months away, it’s never too early to start preparing your records now to make the job easier on both you and your accountant.
Here are 6 simple ways to get ahead on your returns, before the end of the year rush.
1) Locate Last Year’s Return
For many taxpayers upgrading to a new tax software, switching accountants, or otherwise needing important verification, last year’s return can hold crucial information such as your AGI (adjusted gross income) that’s often needed by the IRS and other tax professionals.
It’s highly recommended you keep copies of your returns for at least the past three years, while those looking to claim debt losses or securities should keep on hand seven years’ worth. It’s often recommended to keep actual tax returns indefinitely in case the tax agencies say they were never filed.
2) Request Transcripts in Advance
If you can’t find your full return for last year, instead of requesting another one (a process that can take up to 75 days and costing $0.50/per copy), consider filing for a transcript instead.
Essentially a “summary” of your full tax return, transcripts can often provide the information you need, while shortening the wait time by at least half – often arriving within 5-10 days electronically, or 30 days via mail.
3) Don’t Depend on Refunds
Okay, this one is more of a warning than a tip, but as the IRS can’t legally issue out certain refunds until mid-February, the TCJA will likely lessen your return amount dramatically from last year, and tax delays due to security and fraud threats are common, it’s highly advisable that you don’t depend on your tax refund to settle some financial need.
The money will almost never arrive when you expect it, while the amount can change dramatically based on circumstances. Return payouts are nice, but you should never plan to have yours settle a bill like your rent or loan.
4) Prepare for the New 1040
This year, the IRS has been hard at work compressing the 1040, 1040-EZ, and 1040-A into a single, shorter, updated version, which means that by the time 2018’s tax return is due, there will be new 1040 requirements.
Because of this, for those who file their returns online, you’ll need to validate the form with either your AGI from last year’s tax return, or by entering the Self-Select PIN also used the previous year – so be sure to request your transcripts or remember that PIN in advance!
5) Renew ITINs
For taxpayers without a Social Security Number, Individual Taxpayer Identification Numbers (ITIN) are required instead. However, ITINs expire if not used within the past three years, while those containing the middle digits 70, 71, 72, 78, 79 and 80 must be renewed by 2018’s end.
Not having a current ITIN can severely delay return processing times, so be sure to check that yours is up-to-date long before you’re due to file, while you can apply for a ITIN renewal here.
6) Maximize Your Tax Savings
The year’s end is fast approaching, but we’re not there yet, so don’t forget to use every day available to maximize tax savings. Increasing charitable donations, bolstering 401(k) contributions, and strategizing the TCJA’s new standard deduction are just a few of many ways to get the most bang for your buck.
Bottom line: start now, stress less later (and have your accountant thank you