Now is the time to get these documents ready for tax season
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Tax season 2019 won't kick into high gear until February, as employers have until January 31 to send out 2018 W-2s. But you can do some prep work now to get ahead of the refund rush. Here are the documents to start rounding up for the forthcoming tax season.
If you're using tax software for the first time, you may need your adjusted gross income (AGI) to verify your identity. You can find your AGI on last year's tax return, which you can obtain from your tax preparer.
Alternately, you can request a tax transcript (for free) or full tax return (for a fee) from the Internal Revenue Service. You can put in the request online, by phone at 1-800-908-9946 or by mail via Form 4506-T.
Online and phone requests typically take five to 10 days to process, while mail-in requests for tax transcripts and tax returns take up to 30 days and 75 days, respectively.
Major changes to the tax code are in effect this year, following the passage of the Tax Cuts and Jobs Act in late 2017. To minimize confusion, print out or bookmark the IRS' Publication 5307 for taxpayers. It walks you through the big need-to-knows, including changes to the tax brackets, standard deduction, itemized deductions and the alimony payment deduction repeal.
If you use an Individual Taxpayer Identification Number (ITIN) to file your tax returns, be sure it's still valid. As a general rule, ITINs not used on a federal tax return at least once in the last three years will expire on Dec. 31, 2018. ITINs issued before 2013 with middle digits of 73, 74, 75, 76, 77, 81 or 82 will also expire on that date.
You can renew your ITIN via Form W-7. ITINs are commonly used by individuals who are required to pay taxes, but don't have and can't obtain a Social Security number from the Social Security Administration.
Now's a good time to re-check your tax withholding. Use your most recent pay stubs, last year's tax returns and the IRS' witholding calculator to make your employer is taking enough money out of your paycheck over the course of the year. If it looks like you aren't currently paying enough, submit a new Form W-4 (Employee's Withholding Allowance Certificate) to your employer.
If it looks like you're going to have to cut Uncle Sam a big check by April 15, 2019, consider making an additional or estimated tax payment to the IRS before the end of the year. You can do via Form 1040-ES (Estimated Tax for Individuals).
The Tax Cuts and Jobs Act practically doubled the standard deduction for all filers, so there's a good chance you won't be itemizing come 2019. (For tax year 2018, the standard deduction is $12,000 for singles and married people filing separately, $24,000 for married couples filing jointly and $18,000 for heads of household.)
However, if you are planning to ask the IRS for certain tax breaks, now's the time to gather the proof. Common documentation to track down include:
Tax receipts from charitable organizations
Medical bills, including copays for doctor visits, prescription drugs and Medicare Part B or Part D premiums (For tax year 2018, you can deduct out-of-pocket medical expenses exceeding 7.5% of your adjusted gross income.)
Daycare, after-school program, day camp or babysitter bills, if you expect to qualify for the Child Tax Credit or Additional Child Tax Credit
Receipts for unreimbursed work or self-employment expenses
There are also few tax to-dos you have to get done by Dec. 31, lest you lose out on certain tax breaks or incur penalties. For instance, where applicable, you'll want to maximize 401(k) contributions, withdraw your required minimum distributions and spend the money in your Flexible Spending Account.
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