Check These Things Before the End of the Year to Be Ready to File Your Taxes for Next Year
Although the filing deadline for your tax returns is still months away, there are things you should do now to prepare to make the process better
With Christmas just around the corner, one of the last things on your mind is filing your income taxes. But even though the Internal Revenue Service (IRS) tax filing deadline is still a few months away, there are a few things you should check now before this year ends to make sure you're ready for filing. Once the new year begins, your ability to influence your taxes for next year is very limited.
Making a donation
Any donation you make to a recognized charity is deductible in the year that you make it. For credit cards, if the charge is made in 2019, it is deductible for the 2019 tax year even if you don't pay the bill until 2020. For cash and in-kind donations, etc, the donation should be received by the charity in the 2019 tax year. Checks are typically deductible for the current year if they are postmarked in 2019, but the charity might give a receipt for the following year. So it's a good idea to get donations in to charities early.
You can make a charitable donation to us before the end of the year! Your donations fund the valuable work we do. Thank you!
Contribute to your retirement account
Most contributions to workplace retirement accounts should be made by the end of the year. However, you can make contributions to an IRA that will count for 2018 until April 15, 2019. If you are under age 50, you can contribute $19,000 annually in 2019 ($19,500 in 2020). If you are age 50 or older, you can contribute an additional $6,000 in catch up contributions ($6,500 in 2020).
Tell the government if you moved
If you moved at some point this year, you should notify the U.S. Postal Service, your employer, and the IRS at a minimum. You don't want your documents showing your old address or getting lost in the mail, especially since some mail doesn't forward even though it should. To inform the IRS, mail IRS Form 8822 (Change of Address) to the address listed in the form's instructions. If you bought health insurance through the Marketplace, you should definitely inform the Marketplace if you moved out of the area covered by your current plan.
Tell the Social Security Administration about name changes
Did you change your name? If so, you need to inform the Social Security Administration (SSA) so that your new name will match IRS and SSA records. If you have a dependent whose name changed, you also need to inform the SSA about that change. If there is a mismatch between the name on your tax return and the name in the SSA records, it may lead to problems in processing your return and might even delay your refund.
update your ITIN
Your Individual Taxpayer Identification Number (ITIN) may expire before you file your tax returns. All ITINs not used on a federal tax return at least once in the last three years will expire on December 31. Additionally, all ITINs issued before 2013 with middle digits of 83, 84, 85, 86 or 87 will also expire at the end of the year. Start the renewal process (Form W-7) now so you won't run into any delays.
The IRS has seven weeks from January 1 or from the date Form W-7 is mailed, whichever is later, to inform you about the status of your ITIN application. If you wait to submit Form W-7 until the peak filing season, or if you send it from overseas, allow up to 11 weeks. If you do not renew your ITIN before you file a return, the return may be delayed and you may not be eligible for some important tax credits.
Dig out your old tax returns
You should always keep copies of old tax returns, even if the returns were filed electronically or filed on your behalf. After all, transmission errors happen and sometimes tax professionals drop the ball and either lose your return or transmit late. When you file your return this year, you may need to verify your Adjusted Gross Income from a previous year in order to confirm your identity with the IRS. It's inconvenient, but this is a step to combat tax return fraud.
Adjust your withholding amounts
Since tax laws change yearly, now is the time to submit updated withholding forms for both your federal and North Carolina taxes to your employer. The IRS has an online withholding calculator to assist you in estimating what your withholding amounts should be.
You can give these forms to your employer at anytime during the tax year. But forms should be turned in as soon as possible so that withholding amounts are accurate starting with your first pay in the new year. Always double check your pay stubs to ensure that that changes you submitted were recorded accurately.
Since income is taxed in the year received, you can get some potential tax benefits by deferring income to next year instead of this year. While deferring your regular paycheck can be a bit tough, you may be able to defer a bonus. Are you cashing out a retirement account? If you don't need the money immediately, cash it out in January to defer the tax implications until next year.
This information is not tax or legal advice
This information is being presented for educational purposes. It is not, nor is it meant to be, tax or legal advice. For assistance, consult with a tax advisor, attorney, or the IRS.