Tax Plan for Tax Year 2020
Fail to Plan Is Plan To Fail!
There are only a few days left to plan for Tax Year 2019. Start planning for the new Tax Year 2020: January 1, 2020 - December 31, 2020. You pay Taxes with your hard earned money. Taxes can be complicated and stressful, you could waste your money if you don't properly plan or don't work with the right people and correct website.
Follow these easy to follow tips to help contain your tax stress levels: Stupid and Smart Things Taxpayers Do When Filing Taxes.
In order to reduce your taxes or increase your tax refund in conjunction with your next tax return, tax planning throughout the year is critical. In addition, when planning for life changing events (marriage, home purchase, career change, etc.) you should also consider the possible tax implications. The same is true for unplanned life changing events, they might have unplanned tax consequences.
In summary, tax planning is the process of acquiring the latest tax knowledge and taking the necessary actions to reduce your income taxes.
We at eFile.com help you with tax planning by providing, not only free tools but also asking you relevant questions that could result in your income tax reduction. December 31 is a critical deadline for each tax year, since certain contributions (e.g. medical plan contributions, etc. ) have to be completed by December 31. Furthermore, in the case or a marriage or divorce, December 31 is a critical date when it comes to selecting a filing status. The source or type of income you receive throughout a tax year will also determine your taxable income.
Generally, most qualifying tax deductions and tax credits for a given tax year have to be expensed by December 31 of the tax year. An exception is retirement plan contributions, an IRA contribution can generally be made all the way up until April 15.
Tax Plan Time Guideline
1. Year-Round Tax Planning: January 1 - December 31
- Adjust your paycheck withholding with a Form W-4 so you get your next tax refund now. Do you want your tax refund in your paycheck? Recent IRS statistics show that almost 100 million (or 75%) of all Americans get a tax refund check, and the average refund check is for about $2,400. So why not get some of this refund now as part of your regular paycheck? Every month most taxpayers pay an average of $200 too much in income taxes.
- Tax loopholes for honest taxapayers.
- If your income has not changed from last year, use our 2020 Tax Return Calculator. Alternatively, you can use the year-to-date income from your latest pay stub to estimate your expected annual income for the year (keep in mind that the calculator is based on currently available figures which may be subject to adjustment).
- Access you eFile.com tax return account and download the PDF file of the previous year tax return. In addition, collect all your previous year tax records (e.g. W-2s, 1099s, retirement contributions, medical expenses, charity contributions, etc.).
The IRS recommends that you keep all tax-related records for 3 years in case of an audit. However, some old tax documents, such as last year's W-2's, can come in handy when you are filling out your tax return. A sample list of tax records you should store from previous years and start collecting for the current tax year for next year's income tax return is listed below. If you prepare and eFile via eFile.com part of our customer service is to provide you a PDF copy of your IRS and State tax returns for 5 years. This is not an exclusive list; you might have additional forms, receipts, etc. that are not listed below. TIP: To make your mountain of documents easier to store, try scanning them and keeping them as PDF files. This way, you can print them out if you need them. If you do this, please remember to back up your computer files!
- W-2 forms
- Pay stubs for the year
- Home mortgage payment stubs and/or home purchase closing statement
- Last year's tax return (for quick reference and comparison)
- Receipts from anything you might claim as an itemized deduction
- Receipts from any charity (e.g. for church tithes, disaster relief donations, etc.)
- Car mileage log (in case of business use)
- Any receipts for business travel expenses
- Canceled checks (especially for IRA contributions and other deductions)
- Credit card statements and bank statements (to verify any deductions)
- Medical bills (especially if they exceed 7.5% of your income)
- 1099-G form (for deducting state or local income taxes)
- 1099 forms (from any dividends or other income paid to you)
- Mobile phone bills (especially if you made charitable donations by text message)
- Current Tax Year Planning. Start collecting W-2's, 1099 forms, medical expense receipts, charity donations, retirement contributions, child care expenses, alimony payments, canceled checks, previous year returns, etc.) so you're ready to file next year's tax return or prepare for a possible tax audit.
- As stated above, keep records for at least 3 years in case of an IRS tax audit. For your own peace of mind, you might want to keep them longer. Start a file folder at the beginning of each year, and put all of your receipts into it.
- Check your pay stubs against your W-2(s) to make sure they add up. Even employers can make mistakes!
- Study last year's tax return. Are there any credits and deductions which you are still qualified to take? Are there any you did not take, but you now qualify for?
- Donate to charity! The IRS generally only requires receipts for charitable contributions of $250 or more, but it's a good idea to keep receipts for any donation.
- If you have planned your taxes successfully enough to receive a tax refund, you should invest it in an Educational Savings Account, an IRA, or a savings account at your bank. Use the money to start preparing for next year's taxes.
- You don't have to take the standard tax deduction. Use our tax calculator to itemize your deductions, then see whether the resulting amount is higher than the standard deduction available to you. Choose the higher amount! When you prepare your return with us, our software automatically uses the best deduction method for your tax situation.
- Review existing or start new retirement plans or contributions
- Look at these Tax Savings options or honest taxpayer loopholes
2. From April 30 - October 15
- If you efiled or filed a federal tax return extension, make sure you have all the tax documents you need to complete and file your 2019 return by October 15, 2020.
- Update your W-4 paycheck withholding now and get your tax refund earlier.
- Keep copies of tax returns and know where they are for at least three years in case you receive an IRS notice.
- Summertime Tax Tips: How do summer and taxes go together? You can take advantage of deductions that relate to all your summer activities, such as camp expenses! These summer tax tips will help you save money when you file your tax return later-helping you stay cool!
3. From October 15 -December 31 of Each Year
4. Tax Time Planning: January 1-April 15
Tax Time or Tax Season is usually from January 15 - April 15 (April 15 is the general tax return filing/tax payment deadline). During this time the IRS requires Federal Income Tax Returns to be filed or e-filed for the previous tax year. Most states also require State Income Tax Returns to be submitted during the same time period; some have a May 1 deadline.
During Tax Time you will enjoy the benefits of proactive tax planning as listed under point 1 - 3 above.
- Make sure you have received all W-2 forms, 1099 forms, and other tax documents before you start preparing or e-filing your IRS and/or State Tax Return.
- Use the eFile.com free Tax Calculator and estimate your Taxes before you actually e-file.
- Use any of the many free easy to use tax tools on eFile.com, for example:
- If you have questions about your estimated 2020 Tax Year results, contact an eFile.com Taxpert.
- Why e-filing your taxes is easier, more accurate and faster than paper filing.
- Print out the eFile.com tax preparation and planning checklist to make sure you have everything you need to prepare and file your tax return faster and easier
Plan Now. Avoid Surprises Later.
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Start the Tax Year 2020 Tax Calculator
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