GRAND FORKS - As tax season approaches, many are just now thinking about tax preparation, but some experts say that is already too late.
“It’s more about planning than anything else,” said Cathi Feeley, a financial adviser with Alerus.
People need to start thinking about their taxes as early as September, Feeley said.
“At that point there is actually something you can do to change how much you get back,” Feeley said. “You can actually take action then, if you notice you’re being over-withheld or under-withheld.”
If taxpayers finds in September that they are unintentionally underwithheld, or have not withheld an adequate amount of taxes from their wages during the year to cover the amount of taxes that they owe, then they can start saving modestly to pay the balance.
“If you wait until March or April, you’re scrambling to save for that tax bill,” Feeley said. “You will get a surprise because you haven’t planned.”
But you don’t need an accounting degree to do your taxes or to learn how to plan properly.
“There is all sorts of information out there, almost everyone can do their own taxes,” Feeley said.
Feeley suggested buying a large manila folder and stapling a tax checklist to the front.
“Throughout the year, if you make a donation or have jury duty, throw it in envelope and then it's all there when tax time comes around,” Feeley said.
Doing this will help keep track of important documents and important transactions.
Having a checklist will help make sure taxpayers have everything needed to file taxes and that they are not forgetting to report or claim anything.
A checklist Feeley likes is from Turbotax.
Many checklists will list obvious materials, like Social Security numbers and dates of birth or copies of last year’s tax return. But also list things like various tax forms, alimony, gambling winnings, scholarships, deductions and credits and personal property taxes.
“You need to sit down and thoughtfully look forward to if you are withholding properly, if you got married or had a baby, if you’re planning on getting married or having a baby in the next year,” Feeley said. “Make adjustments and plan for your future accordingly.”
Other helpful tips:
Make sure to learn how the tax reform will change how much you will get back or how much you will owe. Because of changes to tax law, Jackson Hewitt advised taxpayers to expect a different refund amount this year.
When doing a major home renovation, taxpayers should look for applicable credits. “There are often tax credits available for a certain type of project or using a certain company. You should always check if your project will qualify so you can take advantage of the credit,” Feeley said.
The final step in preparing a tax return is reviewing it very carefully, Feeley said. “Check if your math was right, check names, check Social Security numbers,” Feeley said. “If they don’t agree with what the records are, that can throw it completely off. Looking over everything again is really important.”
Tax service Jackson Hewitt is also urging taxpayers to file their taxes early. The tax service urged taxpayers to file before Feb. 15. Due to “significant uncertainty,” Jackson Hewitt recommended filing early, the service said in a release. There is no guarantee that there will not be another government shutdown.
The service advised taxpayers to file electronically. In the event of a government shutdown, paper returns will be slower than electronic returns. Taxpayers should not expect more time to file because of the government shutdown.