Filing Taxes: What You Need to Know Before Tax Season

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Benjamin Franklin famously said, “In this world, nothing is certain except death and taxes.” Filing taxes is a task that almost no one enjoys, but fortunately, there are ways to make it easier.

In this blog post, we will provide you with tips and guidance on how to make your tax filing experience as painless as possible.

Before we dive into the details, it’s important to note that tax laws vary from state to state and between individual situations. For specific questions or concerns about filing taxes, it’s best to consult a trusted accountant or tax professional. Now, let’s get started!

Filing taxes: Professional or DIY? 

First, you need to decide whether you want to hire a professional to do your taxes or do it yourself. There are many great apps and software packages available to help you puzzle through it on your own, which can save you money over a professional preparer.

However, if you have complications in your tax picture for the year, a professional may help maximize your refund and minimize your frustration. You’ll want to ask yourself a few questions before making this decision.

  • Did you have a major change last year, like a divorce or marriage?
  • Did you start a business, cash out a 401(k), or have a child?

If so, professional tax preparation may be very beneficial for you.

IRS Free File

If your tax situation doesn’t require a professional this tax filing season, you may want to look into IRS Free File.

This public-private partnership between the IRS and the tax preparation software industry provides brand-name tax filing products for free to qualifying taxpayers with an adjusted gross income (AGI) of $73,000 or less. 

Gather documents before filing

Before beginning the process of filing taxes, you’ll want to gather all the necessary documents. Here’s what you’ll need:

  • W2s
  • 1099 forms
  • Donation receipts
  • Calculated childcare costs
  • Medical bills paid out of pocket
  • Investment interest tax forms
  • Property tax receipts
  • Student loan interest payments
  • Real estate and mortgage documents (including vacation or rental homes)
  • Last year’s tax return (helpful for cross-referencing)
  • Any other financial documents from the past calendar year

Compile personal information

If you have dependents or are filing taxes jointly with a spouse, make sure you have their personal information accessible.

Whether you file taxes electronically or with the help of a tax professional, you’ll need to have your spouse’s Social Security number if filing taxes jointly, as well as the SSN of any dependents you plan to claim.

Consider last-minute retirement plan contributions

If you haven’t maxed out your retirement plan contribution yet and have extra savings, a last-minute deduction may lower your taxable income and reduce your yearly taxes.

You can contribute up to $6,500 to an IRA for tax year 2023 until April 15, 2024. If you’re 50 or older, you can contribute a total of $7,500.

In 2024, the IRA contribution limit is $7,000 with an extra $1,000 for those 50 and older as catch-up contributions.

Be mindful of tax scams

It’s important to be aware of tax scams when filing taxes. Remember that you sign your returns under penalty of perjury. Even if you work with a tax professional, you’re responsible for any incorrect or misleading information, whether a mistake or fraud. Therefore, ensure that you hire a reputable and credentialed tax preparation professional.

Moreover, be cautious of telephone calls demanding money, texts, or emails claiming to be from the IRS.  The IRS doesn’t initiate communication with taxpayers via email, text, or social media regarding any tax-related issues, including bills and refunds. These are often attempts to scam you.

Need more time?

If you need more time to file your taxes, you can apply for an extension by April 15, 2024. Typically, you can receive an extension of up to six months to prepare your taxes. However, even with an extension, taxes must be paid by the April deadline.

Read more: Should You Use a Personal Loan to Pay Your Taxes?

File your taxes

Filing taxes doesn’t have to be a hassle if you properly prepare and have all your documents in order. Whether you use a professional tax preparer or do it yourself, keep our tips in mind, and you’ll have your taxes done in no time!

 

Prosper does not provide tax advice. You should consult your own financial advisor.


Written by Rose Wheeler

Rose Wheeler oversees the blog’s writing team and creates content strategy for Prosper. With 15+ years of journalism experience, she has covered business and finance-related topics such as consumer finance, financial products, banking, credit, and money management. Previously, Rose served as Editor-in-Chief for Wealth Hub at Future, Deputy Editor at Forbes Advisor, and Content Editor/Strategist at Millennial Money and The Motley Fool. In her free time, she enjoys exploring new places, reading, and playing video games.


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