Tax season is generally a time that most people enjoy, as getting a nice tax refund is always something to look forward to. However, small business/high wage earners such as doctors are likely to hear from the IRS. Understanding how taxation works can give you greater control of your finances. Types of taxes include income taxes, property taxes, sales taxes, estate taxes and more. Here are 4 tips on how you can get prepared for tax season.
- Get organized to avoid mistakes – Start by getting everything organized and double check the accuracy of forms you have filled out, EIN numbers, social security numbers, and identification. Then put everything in a folder where you will remember for next year them (W-2s for income, 1099s for interest/dividends, 1098-T for tuition paid, 1098-E if you paid student loan interest, 1099-G for unemployment compensation received, etc.). Also check out https://www.nerdwallet.com/article/taxes/tax-prep-checklist for a tax prep checklist.
- Avoid excessive or underutilized deductions – Claiming excessive or unrealistic deductions can attract the IRS attention. Make sure your deductions are backed up by proper documentation.
- Document large charitable donations – Charitable donations are very helpful to the community and can result in very large tax deduction. Be sure to classify your charitable donations as business or personal. Previously, charitable contributions could only be deducted if you itemized your deductions. However, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations.
- Get your taxes done for free – There are plenty of places you can file your federal and state taxed for free. It may take some practice but once you learn how to do it you won’t forget and can do it for yourself.
- Check out Volunteer Income Tax Assistance (VITA) here in Manhattan, KS. VITA is an IRS sponsored program that trains and certifies volunteers who wish to prepare tax returns for low-income individuals for free. See details at https://www.riley.k-state.edu/VITA%20Site%20Flyer%202021%2020200125.pdf
- IRS provides access to federal tax preparation online for free for certain filers at https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
- TurboTax is another free website you can use to file your own taxes. There are also professional accountants that can help you for free or for a small fee depending on your income.
- What do Taxes Pay for and what are taxes – Tax is money that is collected by the US government to help fund things like schools, roads, parks, hospitals, and other public services. Payroll taxes fund Social Security and Medicare and are deducted from your paycheck as well from your employer.
- Direct taxes – Money that is paid straight to the government by the individual or business.
- Indirect taxes – Money that is paid from included sales tax, value-added taxes, and tariff.
Schedule an appointment with Powercat Financial so we can help you find the right financial advisor that will fit you and your tax needs. To request a free appointment, go to the request an appointment link on our website at www.k-state.edu/powercatfinancial. Your session may be conveniently held via Zoom.
Tyson Rodriguez
Graduate Assistant
