As the new year begins, it’s time once again to prepare for tax season. Here are five tips to help.
April 15 (or April 18 in 2017) is also known as “tax day,” and it's a date many try to ignore until it becomes unavoidable. But early preparation can be important, especially if you’re new to the process of filing returns.
“Younger people go through a lot of life changes, and there’s a lot they can benefit from,” said Lisa Greene-Lewis, a certified public accountant and the TurboTax blog editor.
If you don’t have a lot of experience filing taxes because you’re in your first job, or because your parents always took care of it, there are a few things you need to know in order to be copacetic with Uncle Sam.
1. Income statements. If you’re employed by a company full-time, they must issue you a W-2. It will show total earnings, what was taxable, and a breakdown of taxes. If you're an independent contractor each company you worked for should send you a form 1099-MISC showing your gross earnings.
2. Asset statements. Have a savings or brokerage account? Expect to get a 1099-INT showing interest paid on a savings account. For a brokerage account, expect a 1099-DIV for any dividends paid and a 1099-B for any proceeds from brokerage transactions.
After you’ve rounded up all the required documents, it’s time to look at how to reduce the amount you owe in taxes. If you have worked as an independent contractor, or if you plan to claim itemized deductions instead of the standard deduction, you may need to spend some time getting organized. For more information, the IRS has posted a summary called “Should I Itemize?” that lists the most common deduction categories.
3. Job-related deductions. “Track down all receipts and documentation for business-related expenses, from the mileage records you kept when using your car for business, to the office equipment and supplies you bought, to the utility bills you paid to keep the home office lights on,” Greene-Lewis says.
She says self-employed people who bought health insurance should look out for a 1095-A. That form shows how much the person paid for health insurance and if they received a subsidy to offset the cost. People who have health insurance through their employer will get a form stating such, but the form is for informational purposes only, she added.
Additionally, people who looked for a job in their same field may be able to deduct travel expenses, even if they didn’t get the job. People who moved for a job and weren’t reimbursed by their employer may be able to deduct those expenses, too, she said.
4. Education and property expenses. Filers who just finished school may be able to get an education tax credit and deduct up to $2,500 in student loan interest. If you live in a state where you’re charged a personal property tax, you may be able to get a deduction. It’s important to get backup documentation from the agency collecting the tax. Each taxing body should send you a statement, so if you moved within the last year, make sure they know where to find you.
5. Charitable deductions. If you give cash or donate items to a charity, that’s another deduction, Greene-Lewis said. For cash gifts under $250, a cancelled check or credit card statement is fine, and for goods, be sure to get a receipt.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Third parties mentioned above are separate from and not affiliated with TD Ameritrade, which is not responsible for their services or policies.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.