When it comes to tax season, preparation is key to easing anxiety, according to experts.
“Tax season can be stressful for many people, but it’s also an opportunity to strengthen your financial plan,” says Michael Corr, chief estate and business planning strategist, Lincoln Financial Advisors, National Planning Team.
“The good news is that there are some simple ways to manage the process.”
To weather the 2020 tax season, Corr offers these tips:
Get the 411 - Whether preparing your own tax return or paying a professional, good organization saves time and money. In addition to collecting the common tax documents (W-2s, 1099s and mortgage interest statements etc.) you should gather receipts, evidence of contributions to charities and 529 plans, and basic information on assets sold during 2019.
Also consider milestones that impact taxes, such as marriage, divorce, birth of a child, adoption and sale of a home. Organizing this information is the first step toward ensuring timely filing.
The Tax Cuts and Jobs Act significantly increased the standard deduction for federal tax purposes. For the 2019 tax year, the standard deduction is $12,200 for individuals and $24,400 for married couples filing jointly. This higher deduction amount means many taxpayers won’t itemize deductions, thereby simplifying tax return preparation.
Be proactive - Consider what actions you can take prior to the end of tax season to lessen its financial burden.
For example, if you qualify and act prior to the new tax filing deadline of July 15, you may deduct contributions to an IRA up to $6,000 ($7,000 if you’re over 50) on the 2019 income tax return. Maximum Simplified Employee Pension IRA contributions of $56,000 for 2019 can be made any time prior to the tax filing deadline, including extensions.
Or, if you participate in a high deductible health plan, you may be eligible to contribute to a health savings account with pre-tax dollars through July 15. For the 2019 tax year, the contribution limit is $3,500 if you’re single and $7,000 for families, with an additional $1,000 catch-up contribution for those 55 or older.
Use technology - Embrace these technological advances to reduce tax preparation and filing burdens:
- Whether self-preparing or hiring a professional, tax information from documents filed with the IRS (W-2s, 1099s. etc.) can be downloaded directly into tax-prep software, so be sure to access electronic versions of these documents.
- Online banking makes it easy to manipulate account information and organize data about relevant expenses paid during the year, like estimated tax payments, medical and tuition payments and business expenses.
- The IRS has offered the opportunity for electronic filing of tax returns for several years. Taxpayers who e-file typically receive acknowledgement that their returns have been filed and get their refunds faster than those who paper file.
More information about financial planning and taxes can be found by visiting lfg.com.