Make Taxes Less Taxing: Tips to Get You Going
Tax season officially started January 24! Thanks to the Patriots Day holiday, Massachusetts residents have a few extra days beyond the traditional April 15 deadline to submit their taxes. This year’s due date is Tuesday, April 19. Here are some tips from Workers Credit Union Assistant Vice President and certified Financial Coach Doug Reedy* to help make your tax preparation go smoothly.
- Start early – Don’t wait until the last minute. Start working on your taxes as soon as possible to avoid the April rush. The sooner you get your taxes filed, the sooner it will be processed and the sooner you will get your refund if you are entitled to one.
- Gather your documents – If you worked in 2021, your employer must provide you with a W-2 wage report form. You also may have 1099 forms that report types of non-employment income earned, such as interest paid on a savings account or freelance work. Homeowners will receive a 1098 form that shows interest paid on their mortgage loan. All Massachusetts residents must show proof of health insurance either through the state or an employer.
- Consider pandemic income –The IRS is sending documentation to people who received extra income in the form of a stimulus check and/or an Advanced Child Tax Credit. The amount is also available on the IRS website. The IRS is also allowing unemployed individuals who didn’t work in 2021 but worked in 2020 and 2019 to receive an Earned Income Tax Credit (EITC), which helps low- to moderate-income workers and families get a tax break.
- Determine your deduction strategy – Your personal situation will dictate whether you should take the standard deduction or itemize. Most people claim the standard deduction. The standardized deduction for a single person is $12,550 and for a couple that’s filing jointly it’s just over $25,000. People who itemize list and document individual deductions such as charitable contributions or medical expenses. Do the math and if your itemized deductions would help you more, that’s the way to go.
- Think about your refund – If you are slated to receive a refund, consider what you will do with it before it arrives. While it’s tempting to use the money to buy a big-ticket instant gratification item such as furniture or a vacation, consider using it to help pay down debt or to add to your rainy-day savings fund. If you’re unsure, talk to a financial coach and they can help you determine the best use for your refund based on your individual situation.
- Get help if you need it – For those who need help, but can’t afford to hire a tax prep professional, you have options! Nine Workers Way financial coaches are among those participating in the IRS Volunteer Income Tax Assistance (VITA) program through Community Teamwork of Greater Lowell. Participants fill out a form and are connected with a volunteer who assists them with preparing their taxes at no extra cost.