A 6-Week Prep Guide for Filing Your 2017 Taxes

A 6-Week Prep Guide for Filing Your 2017 Taxes

It’s six weeks until T-Day.

That’s Tax Day for those of you who haven't given much thought to the yearly deadline.

While we're not quite there yet, crunch time is just around the corner — unless you start gathering your materials and making some serious strides today.

To help you break down your to-dos into bite-size action items, we created this handy taxes guide, outlining tasks to consider tackling week by week.

So try saying hello to a more productive and stress-free tax season this year — and goodbye to the procrastinator's panic you won't be feeling come April.

Tax To-Do #1: Decide Who Will Prepare Your Return

When Today
What’s the Rush? Many tax preparers' calendars started filling up in January — so if you think you'll want professional help, you need to act fast.

Your decision on whether to fly solo or look for help hinges on two things: How complex the process is likely to be, and how comfortable you are with the tax code.

“People with just a W2 income — meaning they’re a traditional employee of one company — and perhaps a few itemized deductions may want to consider purchasing their own tax software,” says Laurie Samay, a client service associate at Palisades Hudson Financial Group, a firm in Scarsdale, New York, specializing in complex tax returns. "That's the baseline for an uncomplicated return."

But if the thought of going it alone makes you sweat, or your situation isn't quite so straightforward — say, you own a business, have rental income or got married this year — you may be better off working with a CPA, enrolled agent or tax attorney.

If you don't have someone in mind, Howard Hook, CFP®, a CPA and financial planner with EKS Associates in Princeton, New Jersey, suggests asking for recommendations from friends or colleagues — provided their tax situation is similar to yours. For example, if you're a freelancer, you'll want to seek referrals from other contract employees.

And if you do decide to hire help, don’t wait to call. “Make your appointment as early as possible, so you can get it on the calendar,” Hook says.

If you’re too late to schedule an appointment, you may be forced to file an extension or else be subject to penalties.

RELATED: 7 Last-Minute Tax Filing Mistakes People Often Make

Tax To-Do #2: Gather Your Paperwork

When March 5 to March 15
What’s the Rush? It's important to have all of your relevant documents on hand before you — or a preparer — start completing your tax return. Plus, finishing this process a month ahead of the deadline gives you enough time to request a corrected form, or replace one that's missing.

By now, you should have received all of your tax documents in the mail — but if you aren't sure you have everything you need, Hook recommends looking at a copy of last year's return.

“Make a checklist to ensure you have those documents again this year,” he says, adding that most professionals make this process easy for clients by sending them what's called a Tax Organizer with general questions they need answered.

Here are some items to look for:

  • W-2s
  • 1099s (a form that states non-wage income)
  • Statements from your brokerage accounts
  • 1095-B and/or 1095-C (forms that report your health insurance coverage)
  • Receipts for charitable contributions, medical expenses or unreimbursed business expenses

The full list can be quite long — especially if you’re paying tuition, repaying student loans, own a business, receive IRA distributions or have significant investments.

So be sure to review whatever list you're working from very carefully.

Tax To-Do #3: Dig In — And Do Your Taxes

When March 16 to April 6
What’s the Rush? If you hit a roadblock or decide to take additional steps to minimize your tax burden, you'll want to have as much cushion as possible before the filing deadline.

If you’re leaning on a trusted professional to do your taxes, this part is a cinch. But if you’re using software to complete your own forms — or you want to ensure your accountant is hitting all the right notes — here are some potentially important questions to ask.

If you're a single person and discover your deductions equal more than $6,350, then you'll want to list them on your return in order to shave more money off your taxable income.

Should you itemize your deductions? Most taxpayers are eligible to deduct certain expenses — such as sizable charitable donations, medical expenses, and property taxes — but not everyone understands whether it's in their best interest to itemize them.

“Itemizing” means adding up deductible expenses to determine whether the grand total exceeds the government's standard deduction. For 2017 it's $6,350 for singles and $12,700 for married joint filers.

So if you're a single person and discover your deductions equal more than $6,350, you can list them on your return in order to shave more money off your taxable income. If not, you can simply take the standard deduction.

Luckily, this isn't a decision you'll necessarily need to make on your own. Either your tax software or your preparer can tell you which method will yield the highest savings after reviewing your information.

Do you qualify for tax credits? While a deduction decreases the amount of your income that's subject to taxes, a credit reduces — dollar for dollar — the amount you owe. So if you claim a $2,000 tax credit, you save $2,000 in taxes.

Common tax credits include the American Opportunity Tax Credit, which gives you up to $2,500 for tuition and other qualified education expenses. There’s also the Child and Dependent Care Credit, which allows you to claim up to $3,000 in child or dependent care expenses for one kid.

RELATED: How an Energy Audit Saved Us $2,400 a Year

Did you buy health insurance on the state exchanges? If you failed to sign up for adequate health insurance coverage last year, you will have to pay, with some exceptions, a penalty of either 2.5% of your yearly household income or a flat rate per adult and child — whichever is higher. (Note that this penalty remains for tax year 2017, but was repealed by lawmakers for your 2018 tax returns.)

Should you make a last-minute retirement contribution? While you can’t put any more money toward a traditional 401(k) for last year, you can make a tax-deductible contribution to an IRA, SEP IRA or a solo 401(k) right up until April 17.

Once you’ve done a first pass on completing your return, you can go back and play with the numbers to determine if it's worth making more contributions. In some cases, if your adjusted gross income is just over the limit for a significant deduction or credit, a bonus retirement contribution could help squeeze you under the line — while padding your nest egg at the same time.

Just don’t forget to note that your investment is meant for tax year 2017, or your money will be credited toward this year's contributions instead.

In 2018 you can contribute as much as $18,500 to your 401(k).

Tax To-Do #4: Get a Jump on 2018 Tax Prep

When April 18
What’s the Rush? The best time to make decisions about next year’s taxes is when you’ve just waded through this year’s paperwork.

We realize you've barely finished celebrating the end of this tax season — but taking care of a few additional housekeeping items now could help make filing your taxes in 2018 a breeze.

Here are three things to consider.

Do you know how the new tax law affects you? Income tax brackets have changed, the standard deductions have doubled, and many itemized deductions have gone by the wayside for 2018. It's important to know what's new, and how you might be impacted.

Will you need to change your withholdings? Although the IRS has updated its withholding tables to adjust to the new tax brackets, you may still need to change your withholdings, especially if your refund check or tax bill was sky-high last year, or if you're going through a big life change, such as getting married, divorcing or picking up a second job.

Are you putting enough away for retirement? In 2018 you can contribute as much as $18,500 to your 401(k) — that's an extra $500 compared to 2017.

Yes, it's only April, but consider bumping up your contributions by a few percentage points now, especially if this move helped lower your tax burden this season. Plus, you'll be doing your future self a favor by increasing your retirement balance. It's a win-win.

Are you organized? If this year’s tax prep involved rummaging through stuffed desk drawers and piles of papers, now’s your chance to do a better job next year.

Think about your paperwork categories: Do you save receipts, and designate a folder in a desk drawer or hanging file for them? If not, consider using expense software to organize them.

“It’s better to keep track of things as you go along, rather than having to go back and try to find them,” Hook says. “At the end of the year, you have it all in one place.”

RELATED: How Long Should I Keep My Financial Documents?

This article is not intended as legal or tax advice. Financial Representatives do not give legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.


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