By Dr. Daniel B. Prescott, Jr., Special NDG Contributor
While it’s still February, we all know that April 15 is an annual IRS deadline not to be missed (this year the deadline is April 18, because April 15 falls on a Saturday). The old adage goes, “You can’t escape death and taxes,” which is why we wanted to give you a head start on preparing for tax season.
Because this topic is so important, we’ve decided to provide a Part I and Part II (coming in March).
Tax Checklist
Let’s start off with a checklist of what you’ll need in order to complete your Federal income tax return—what to gather before beginning the process. First, round up personal data such as last year’s tax return and Social Security numbers for you and any dependents. Next, pull together income statements (W-2 and 1099 forms) indicating what you were paid in the last fiscal year and the amounts withheld. By law, employers should have this paperwork to your address by Jan. 31 of each year.
Deductions are next, as they reduce your overall tax liability. Common deductions include contributions to a retirement account, medical bills (if they surpass a threshold of 10 percent of your gross income), education-related expenses, property tax and mortgage interest deductions.
Last but not least are income tax credits, most commonly provided for those with children, and are worth $1,000 per dependent.
Options for filing your tax return
Now comes the filing exercise, which can be accomplished in a number of ways. You can pay a professional Certified Public Accountant (CPA) to prepare your return, but that can be costly and may not be necessary if your financial situation isn’t complicated. A less expensive option is to visit an H&R Block location. You’ll still pay a fee, but considerably less than a CPA-level consultation.
If you prefer to file your tax return on your own, you have multiple software and online options including TurboTax, TaxSlayer or TaxAct. These programs have become remarkably easy to use over the past few years and offer step-by-step instructions and tutorials—all to make sure you get the job done right.
If you are not in a position to have a professional consultation, and you do not feel comfortable undertaking the tax return process on your own, the Dallas-Fort Worth area has several free tax return preparation options for you. Our friends at the United Way of Metropolitan Dallas maintain 26 locations across the area, staffed with over 700 volunteers—if you qualify for the assistance. In order to qualify, you must make less than $52,000. To find a location in your immediate area, simply visit www.mymoneydfw.com.
As an additional option, Transformance is also joining forces with Community Tax Centers, a Foundation Communities program that offers free tax filing services to Texas residents who qualify. Check out the requirements on CTC’s website.
Stay tuned for Part II of our Preparing for Tax Season, next time around. We will cover some key do’s and don’ts regarding tax returns and provide some insight on what to do with a Federal tax refund. We will present specific ideas that can help you get out of a debt situation, begin saving more and the establishment of a proper household budget.
Transformance is always available to answer your questions and assist you, either through our website or by calling 1-800-249-2227.
Dr. Daniel B. Prescott, Jr. is the Interim CEO of Dallas-based Transformance Inc., a fully integrated financial services capability nonprofit. He can be reached at dbprescott@transformanceusa.org.
