For many of us, tax season is something we’d rather avoid. And it’s no surprise why, since each taxpayer spends about 12.5 hours preparing for and filing taxes, (1) not to mention the added tax-preparation costs. But since the 2020 tax filing season has officially begun and you have to face it eventually, the sooner you get everything in order, the sooner you can shake off that stress and spend your time doing what you love instead. Here is what you can do to prepare for this tax season.

Gather & Organize Your Important Documents

You’ve probably been receiving various tax documents in the mail for the past month, so now is the time to organize that pile sitting on your counter. You may have documents such as:

• Form W-2: These are issued by employers and show your wages and tax withholdings. They are supposed to be mailed by January 31.
• Form 1099-MISC: These report income you have received as an independent contractor or freelancer. You should receive one from each person or company that pays you.
• Form 1099-INT: This form will show any interest you have earned.
• Form 1099-R: This form reports income received from annuities, IRAs, or pensions.
• Form 1099-DIV: Any dividend income you earn is reported on this form.
• Form 1099-B or 1099-S: You will receive these if you have any income from the sale of property or stock.
• Form 1098: You will get this from your mortgage company reporting the interest that you paid.
• Form 1098-T: This reports payments of qualified tuition and expenses.
• Form 1095-A or 1095-C: These forms report your healthcare coverage for the year and your premium tax credit, if applicable.
• Schedule K-1 (Form 1065, Form 1120S, or Form 1041): This reports income for a partner, a shareholder, or an income beneficiary of an estate or trust. Schedule K-1 normal deadline can be as late as April 15th. 

Please make sure you have received all of your tax forms before you make an appointment with your tax professional since filing amended tax returns have statutory time limit and can be painful.

If you want your tax filing experience to go smoothly, you’ll also want to make sure that you have all of your and your dependents’ personal information available, such as Social Security numbers and dates of birth. Also, if you itemize your deductions, start gathering your receipts for healthcare expenses, charitable contributions, and records of your taxes and interest paid.

Review Last Year’s Return

Looking over your 2018 tax return is a good way to get a sense of what you will need to file your 2019 tax return. Make sure you have statements for all the accounts and investments you included on last year’s return. This will also remind you of any special deductions or credits that you may be eligible for. If you’re working with a new tax professional this year, providing them with a copy of your 2018 return will make your 2019 return quicker and easier for them. 

Make Necessary Changes

While it’s helpful to look over last year’s return, you also need to take into consideration any changes that have occurred over the past year. Did you add another child to your family? Did one of your children start college? Did you start taking withdrawals from a retirement account? All of these changes need to be reflected on your tax return but won’t show up on prior returns.

More than personal changes, there may be changes to federal or state tax law that you should be aware of. The Tax Cuts & Jobs Act tax reform bill of 2017 is still being implemented and the new SECURE Act could also affect your 2019 tax situation. A knowledgeable financial professional can help you understand any tax law changes and how they affect you.

Make A Plan

While it’s important to get your 2019 tax return filed properly, it’s just as important to look at the bigger picture of taxes in general. Are you optimizing all of the tools available to you to limit your tax liability? Are there steps that you could take now to minimize future taxes? Do you have a plan for your tax refund that will further your overall financial goals?

Taxes are complicated, to put it lightly, so it helps to work with a professional who understands them if you want to maximize the opportunities available. An experienced financial advisor can help you with tax planning in light of your overall goals and financial plan.

If you want to be proactive about tax planning and don’t have a trusted advisor yet, our team at Mason & Associates would love to meet you to help you experience confidence in every aspect of your financial plan. Contact our office by calling us at (323) 254-3072, or simply click here to book your free 30-minute introductory phone consultation today!

About Mason & Associates, Inc.

Mason & Associates, Inc., was founded in 1989, specializing in Life Planning for individuals, families, and small businesses. Life Planning places a person’s core life values at the heart of the advice process and focuses on the human aspects of financial planning.

As a client, your personal story is key to our planning process. That is why we strive to build a close relationship that will encompass every aspect of your life. Together with our team of professionals, we guide you through the process of identifying what is important to you, your goals, your dreams. We then put into place a financial road map to set you on your way toward achieving your objectives.

Our responsibility does not end there. As you encounter bumps in the road, changes in goals, or any other roadblocks, we are there to offer advice and guidance. We are there to celebrate your successes and cope with your challenges. We work alongside your other professionals, such as your attorney and your CPA, to be sure all of your legal and financial needs are aligned.

___________________

(1)  https://www.theatlantic.com/ideas/archive/2019/04/american-tax-returns-dont-need-be-painful/586369/