Tax Day is less than two months away. Are you ready?
Hare some of the key points to keep in mind as you begin to focus on preparing your tax return, as well as a few new wrinkles for the 2013 tax year:
1. GET ORGANIZED
The first step toward preparing an accurate return is to make sure you have all the necessary documents. At the top of the list are the forms detailing your income for 2013. This could be various 1099 forms, typically received by workers hired on a contract basis, or a Form W-2, commonly issued by employers of salaried or wage workers.
Taxpayers who did a lot of independent contractor work will need to make sure they have a complete set of 1099s.
2. UNDERSTAND WHAT INCOME IS TAXABLE
People who receive income from other sources aside from an employer should make sure they know whether they need to include those earnings as taxable income on their return. Some examples of income that are usually not taxable are child support payments, gifts and inheritances, and welfare benefits.
Sometimes there are caveats. For instance, scholarship funds used to pay for tuition and books are not taxable. But if you use some of that scholarship to pay for room and board, that amount would be taxable.
The Internal Revenue Service has more details in Publication 525 on IRS.gov.
3. CONSIDER NEW TAXES FOR 2013
Lawmakers mostly kept tax laws unchanged in 2013, but there are a few tweaks that could affect some taxpayers, particularly those who earn more than $100,000 a year. Several changes came about as part of the federal health care overhaul.
One key change applies to medical expense deductions.
Previously, if your medical expenses eclipsed 7.5 percent of your adjusted gross income, you could deduct any medical costs above that threshold. For this tax season, the threshold has been raised to 10 percent.
Another new tax applies to people whose income exceeds $200,000, if they're single, or $250,000, if they're married and filing jointly. The government will apply a 0.9 percent tax to income above those thresholds.
"This could catch particularly married tax payers by surprise," said Lindsey Buchholz, a principal analyst at H&R Block.
That's because employers won't start withholding this tax until the person's income exceeds $200,000. Married couples who separately have income under $200,000, but jointly surpass the $250,000 threshold, would not have the additional tax withheld.
4. EMBRACE E-FILING
The IRS estimates that more than 80 percent of tax returns are filed electronically. And if you have a refund coming, filing your return electronically and requesting that the funds be paid directly into your bank account is the fastest way to get the IRS to pay up.