Essential Steps to Follow to Get the Most Out of Your Tax Return

You can't avoid taxes, but these steps will ease the burden of filing them.

Jonathan Gassman recently visited his 94-year-old mother in Florida. One of the primary purposes of his visit? To help her with her taxes. "I'm Mister Checklist," says Gassman, who runs Gassman Financial Group, and is a proponent of a simple, straightforward tax to-do checklist for all. "Let's make sure we don't leave anything off," he adds.

A tax checklist is great advice for anyone. Here are some things to consider as you build—and check off—your own list this tax season, although always review your circumstances with your financial advisor if you have one.

What to Ask a Tax Preparer

Amber Gray-Fenner, owner of Tax Therapy, urges taxpayers to ask about a tax preparer's qualifications and practice. That includes inquiring about their overall level of experience, their staffing, and the volume of work the office does.

"I do not feel like we could do more than, and this is a maximum, 350 tax returns in a season thoroughly," Gray-Fenner says. "If you have one of these pop-up shots with one preparer and they're preparing 500 returns a year, you have to wonder how they're getting it done."

Also ask about a tax preparer's written information security plan, or WISP, to see how safe your information is. "If they go deer-in-headlights, ask if they have professional liability insurance," Gray-Fenner adds.

Where (and When) to Start

Pull together all your documents. That includes last year's tax filing, W-2 forms; 1099 forms if you're self-employed or have certain other types of income like investment or unemployment; medical expenses; charitable donations; college tuition tax forms; and so on. Some may come in electronic form and not paper.

Start preparation as early as possible. The closer you get to Tax Day, the greater the chance that you'll have to file an extension and wait longer than you would have for a refund; preparers get busy this time of year.

Set up an online account with the IRS. You can check what you've filed and paid—and make electronic payments (much better than sending in checks).

If your family has seen an upward financial transition within the last generation, advice on strategies is a must. "The majority of folks we're talking to are the first generation of wealth builders," said Calvin Williams of Freeman Capital, which caters to underserved communities. "They are facing problems that their parents never faced."

In addition, year-over-year changes in your financial picture are always important. Life changes like a new kid (whether a baby, adoption, or foster child), the need to care for an older parent, a marriage, divorce, or death of a spouse—all of those have significant implications for taxes, according to Mark Steber of tax preparation service Jackson Hewitt. Likewise, a new job, an unexpected windfall from an investment, a major medical expense, or the purchase or sale of a house should all be factored in.

Overlooked Ways to Maximize Your Tax Payoff

There are plenty of ways to get the most out of your taxes—that plenty of us forget about. For example, an income reduction could mean unexpected access to the Earned Income Tax Credit or child tax credit for dependent children.

And "if your taxable income falls below the long-term taxable gain rate, you're [also] at a zero-percent capital gains rate," Stephanie McCullough, founder of Sophia financial planning for women, says. "I have clients," she adds, whose "grandfathers bought them stock for their bar mitzvah or something"—some of whom may now be able to sell shares without taxes due.

If you took money out of a 401(k) to help pay expenses, that cash is taxable, too. However, if you didn't already pay the taxes, you may be able to over a three-year period—and not stress yourself unnecessarily now.

Are you or your parents retired? Tally medical expenses, like Gassman did for his mother, and include, if applicable, Medicare premiums taken out by the government to see if that provides a new deduction or tax break.

States and many municipalities also have taxes. "A lot of employers are double withholding, in the state you work and in the state you live," to avoid withholding too little, explains Gray-Fenner. In addition, most states tax unemployment income, although, according to Robbin Caruso, partner at accounting firm Prager Metis, "a number of states, including Alabama, California, Montana, New Jersey, Pennsylvania, and Virginia do not."

Mind Your Business

You may have filed to start a business last year. Or you may have done gig work through an online platform to help make up a shortfall without thinking of yourself as starting a business. If any of that applies to you, then congratulations: You're now an owner.

"A lot of people turned their side hustle into their main hustle when they lost their corporate jobs," Ben Richmond, CPA, of Xero says. Of course, owning a business includes the additional tax considerations that your more experienced sister entrepreneurs have. There are more forms and taxes on that income—including Social Security. But there are also deductions waiting for you.

"I find the self-employed individuals are not educated well enough to understand all of the possible deductions they can avail themselves of," Gassman says. "Like home office." McCullough agrees: "Think about what legitimate business expenses you had in setting things up ahead of time, like getting a domain registered or buying a laptop."

In your first year of business, you're "able to claim up to $5,000 in start-up costs," Richmond notes. Even car use for business is deductible, whether you're using the standard mileage rate the IRS publishes annually or by closely tracking actual costs. Gig workers might get that deduction and the home office deduction.

Employees working from home can't deduct the use of their office space, but those with a new business probably can, even if that business is only part-time—as long as the space is devoted to that use.

Sure, this may sound like a whole lot of steps, but taken individually, they're all manageable. Plus, they're more than worth it for the payoff: Reducing your tax liability or increasing your refund. Just start by crossing one item off your list at a time—you've got this.

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