Starting Jan. 27, the Internal Revenue Service will begin accepting tax filings for the 2019 fiscal year.
But in Houston, where small businesses are plentiful and tax professionals number in the thousands, there are a few tips and tricks to getting your taxes ready before Apr. 15.
Here’s how to pick a tax filing method that works for you and your money, and what you need to know about tax changes in 2020.
Going to e-file?
IRS Free File allows tax filers under a certain income threshold to file their taxes for free through automated programs like H&R Block and TurboTax.
The income levels vary from service to service. You need to make less than $69,000 for most IRS Free File programs. TurboTax puts the cap lower at $36,000 unless the filer is an active-duty member of the military or veteran.
Each program differs, but you will generally need all your tax documents (which should be mailed out by mid-February). That may include W-2s, 1095s (for health insurance verification), 1098s (a form to note paid interest on a student loan, college tuition or charitable donations) and 1099s (for income that isn’t salary, wages or tips).”
If you make more than $69,000, you can still file for free. However, you have to file through forms provided on the IRS website instead. It may not provide the kind of step-by-step guidance taxpayers will get from preparers and third-party free filing programs.
IRS Free File hasn’t always been available. The tax industry agreed to make and publicize free versions of tax filing software for low- to middle-income taxpayers after a ProPublica investigation found that both TurboTax and H&R Block were creating code that would hide its free file programs from Google search results. Changes at the end of 2019 also dismantled a rule banning the IRS from creating its own free filing system.
Can I pay a professional to do it?
If your taxes are really simple — think a single W-2 form from your employer — then you probably don’t need to go through your finances with a tax preparer. But you may want to leave it up to the professionals if you want to learn what parts of tax code affect you or need to navigate a thick stack of forms.
The IRS offers a directory of qualified tax professionals to help you avoid being scammed. You’ll want to narrow down your choices by figuring out how complex your taxes are. The National Association of Enrolled Agents also offers a database of preparers.
Go to a certified public accountant (CPA) who specializes in tax preparation or enrolled agent for complicated tax cases. “Complicated” means you have multiple streams of income, are a freelancer or contractor or own a business.
Make sure you have documents from every job that paid you in 2019, and yes — even your side hustle counts as a business.
“If you’re doing Mary Kay or Tupperwares and do $2,000 in business,” said Ward Molen, who owns Molen and Associates, a Houston-based tax preparing service, “Well, you have a business and if you don’t report properly, once again you could end up in a hole, pay more taxes or get on the wrong side of the IRS and be audited if you minimize the time and effort needed.”
Should the IRS audit you or if there are any collections issues along the way, enrolled agents and CPAs specializing in taxes are the only ones authorized to represent you. They are regularly re-tested on tax code and can help you understand tricky finances.
Houston tax experts say it’s key to find a firm that has a large enough staff to handle your taxes before the April 15 deadline.
“The more advisers you have, the less bottleneck ends up getting created,” said Kevin Molen, a supervisor at Molen and Associates.
Sources: Houston Chronicle