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Itimize deductions

Advantages of Completing your Taxes Early

Tax time is stressful, even if you’re going to receive a refund. The anxiety that accompanies filing yearly income taxes leads many to wait until the last minute to even begin gathering the records they need. There are actually a number of benefits to conquering the fear and filing your taxes early.

Quicker Refunds

Filing as soon as possible means you’re going to receive any refund faster. That’s especially true if you file electronically. There’s a significant difference in the time it takes to process a paper return than one that’s e-filed. Filing early also increases the accuracy of your return.

Extra Time to Pay

If you do owe money to the IRS, finding out early gives you extra time to pay them. You can submit your tax return early, but you don’t have to have the money to the IRS until the filing deadline in mid-April.

Information for Planning

If you have kids that will be attending college and they rely on your income to apply for financial aid, filing early gives you that crucial data. Tax return information is also utilized for other purposes such as financial pre-approval for purchasing a home.

Avoid Extensions and Interest

You may very well need the services of a tax professional to file your taxes if you wait until the deadline is near. The closer it is to the filing deadline, the more difficult it will be to schedule an appointment with a tax preparer.

You may also need to file an extension if you wait. Doing so will give you additional time to plan on how to pay the IRS what you owe. However, if the amount isn’t paid in full, the IRS can charge you interest and penalties until the balance is fully paid off.

Identity Theft

Scammers file billions in fraudulent tax returns every year, robbing people of the refunds to which they’re entitled. Filing early helps prevent someone from submitting a tax return in your name and getting your refund.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

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Should I Itimize my Deductions?

When you finally decide it is time to prepare your taxes, the first question is whether you should itemize your deductions or take the standard deduction provided by the IRS.

Tax deductions are a very simple part of a theoretically simple tax reporting system. If you’ve ever prepared your own taxes, you know this simply isn’t true. Complicated tax forms can be a nightmare to fill out. Ever helpful, the IRS gives you an option of just taking a standard deduction instead of itemizing your deductions. So, what should you do?

The standard deduction is the easiest method because it requires no calculations or supporting documentation of any sort. You figure out your adjusted gross income and simply submit the amount for your classification. The amount differs based on whether you are filing as single, married, older than 65 or have kids.

Many people scoff at the mere idea of taking the standard deduction. As with all tax issues, deciding whether to take the standard deduction isn’t so easy. If you have a fairly simple financial life and don’t have many deductions, the standard deduction is almost always the best choice. For instance, if you make $45,000 as an employee of a company, rent a residence and don’t have any major medical bills or losses, the standard deduction is probably going to save you more money than itemizing. Unfortunately, you can never be sure until you take a stab at itemizing your deductions in a rough draft of a tax return.

Itemizing your deductions is exactly what it sounds like. You literally go through your records and categorize every possible deduction. These deductions are then subtracted from your adjusted gross income to get a final figure from which tax is determined using the tax tables. Itemizing is the way to go if you have significant tax deductions or tax credits in your financial life. For instance, you almost always want to itemize if you own a home as mortgage interest can be deducted. Generally, you want to itemize if you own a home, have significant medical bills, can claim a tax credit or suffered some type of major loss. Obviously, there are other situations where itemizing makes sense, but this gives you an idea of the situation.

If you have a simple financial situation, claiming the standard deduction may be the answer. If life is a bit more complicated, itemizing is probably going to save you more on your tax bill.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

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