Tax Prep 101!
Did you know there are more than 70,000 pages in the federal tax code? With so much information to digest, just the sheer thought of beginning your income taxes could feel overwhelming.
But there are times when first-rate tax prep software might do the job. Ernesto Raices, owner of Austin Taxes & Bookkeeping Service, says you make a good do-it-yourself candidate if your only income is reported on W-2s containing no information in boxes 12 and 14, you’re single, rent rather than own your home, and receive employer-provided health insurance. This describes many Texans filing returns for the first time.
In more complicated situations — e.g., itemizing deductions, reporting business and/or investment income — Raices suggests seeking assistance from a trained and experienced tax specialist. When itemizing, folks who go at it alone tend to overlook credits for energy-saving home improvements and deductions for points paid on home refinancing.
Not only can pros keep you from missing out on allowable deductions, but they also keep up with our ever-changing tax codes. And, such practitioners can home in on what Raices calls “red-flag” items — entries that might make the IRS look longer at your return.
Regardless of whether you do your taxes yourself or hire help, Raices recommends hanging onto documentation to back up each number on your return. “Keep these documents for at least six years,” he says. “The most common advice in document retention is three years, but if you’re being examined by the IRS and they find certain types of inconsistencies on your return, they can go back and open as many tax years as they need.”
Prep your taxes? Check. Now see what other important tasks need to be checked off your to-do list. Download the Texas Heritage for Living® monthly checklist, a printer-friendly PDF.
