A 5-step guide to preparing for tax season

Simplify tax season and potentially enhance your return by following these five steps.

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Don't let that ever-growing pile of tax forms and paperwork intimidate you—preparing your 2018 tax return may not be as tough as you think.

Taking these five steps can help you de-stress your tax filing—and you might even get a bigger refund in the process.

1. Start as soon as you can

Although 2018 federal income tax returns aren't due until Monday, April 15, 2019, we suggest you fight the urge to procrastinate. Waiting until the last minute to get started, and then rushing through your tax filing, increases your risk of making mistakes that could cost you real money.

Instead, try starting your tax filing as soon as you have all your needed forms and paperwork. As an early tax filer, you'll probably get your refund earlier, and will be less likely to lose your refund to identity theft. Plus, the sooner you file your taxes, the sooner you can check that task off your to-do list and focus your time and energy on other goals.

2. Get organized

Having all the necessary tax forms in order is crucial to getting your taxes filed quickly and smoothly.

Your W-2 and 1099 forms report wage and salary information for employees, income from self-employment earnings, interest and dividends, government payments, and other sources. Other common tax documents include statements from interest-earning bank accounts, documents from mortgage and student loan companies, and documents detailing interest payments you made this past year.

The deadline for companies to release the previous year's tax documents is January 31. Keep track of these important forms as they arrive by mail or email, and set them aside for safekeeping in a dedicated folder. If you still haven't received all your needed tax paperwork by mid-February, submit requests for those missing documents with the organizations that owe them to you.

If you have a workplace savings account with Fidelity, such as a 401(k), 403(b), or 457(b), you may be able to download some of your tax forms directly from NetBenefits.comLog In Required. From the home page, select Quick Links > Summary > Bank/Tax Information.

3. Learn about deductions and tax credits

Taking advantage of deductions and tax credits you may qualify for will help you get the most from your tax return.

Deductions: standard vs. itemized

A deduction is an amount of money you can subtract from your total taxable income amount, meaning you pay less in income taxes, and you might even fall into a lower tax bracket in the process.

You may have heard that deductions have increased this year under the Tax Cuts and Jobs Act (TCJA), enacted in late 2017. In fact, they've doubled from last year—up to $12,000 for single filers and $24,000 for married couples filing jointly. Also, standard deductions for the elderly, the blind, and people with disabilities have increased slightly. However, the new law did eliminate the $4,050 personal exemption.

This table offers more details about deductions and how they've changed.

  2017 2018 – 2025
Standard deductions
Single $6,350 $12,000
Married filing jointly (MFJ) $12,700 $24,000
Elderly or blind (single and not a surviving spouse) Additional $1,550 Additional $1,600
Elderly (both over age 65 and MFJ) Additional $2,500 Additional $2,600
Personal exemption $4,050 per family member Eliminated

Because the new higher standard deduction will be greater than many taxpayers' total itemized deductions, the Tax Policy Center (PDF) estimates that over 25 million families will stop itemizing in 2018. That's more than half the number of people who have itemized in the past few years.

How can you decide whether it will still make sense for you to itemize this year? Start by looking at your tax returns for 2016 and 2017. If your taxes for 2018 look similar, and your itemized deductions fall below the new standard deduction, you will probably not itemize this year. On the other hand, if your deductions for 2018 are higher than the new standard deduction, you'll need to consider your options.

If you're still unsure about what your best options are, talk to a tax professional for advice.

Tax credits

The federal earned income tax credit (EITC) is one of the most valuable tax credits available to taxpayers. The rules for the EITC are a bit complicated, so many people who think they won't qualify may actually be eligible.

For example, a married couple filing jointly, with three or more children and an adjusted gross income (AGI) below $54,884 for 2018, may be partially or fully eligible.

Most states also offer an EITC for state income taxes. See if you live in one of them.

Although it was recently modified by the Tax Cuts and Jobs Act, if you have children, you may be able to claim the child tax credit to lower your taxes even more, with a $2,000 credit per qualifying child under the age of 17—as long as your modified adjusted gross income (MAGI) is below $200,000 for an individual, or $400,000 for married couples filing jointly.

If you have a low or moderate income, you may also qualify for the Saver's Credit, which offers a tax credit worth up to 50% of your retirement plan, IRA, or ABLE account contributions, with a maximum of $4,000 for married filers, depending on your adjusted gross income (AGI).

4. Don't pay too much for tax help

If you feel overwhelmed by all the complexities of filing your taxes, getting professional tax help may be more affordable than you think. In fact, most people earning less than $54,000 per year are eligible for free help preparing their tax returns. There are a few other rules about qualifying, so visit the IRS's website to see whether you qualify, and to find volunteer tax preparers in your area.

You may also qualify for Free File, the IRS's free tax-preparation and filing software for individual federal income taxes.

5. Consider using your tax refund to build your emergency savings

If you do get money back from your taxes this year, make a plan to use your refund money to help meet your financial goals. It's tempting to use your tax return for a splurge, but you'll probably get a longer-lasting benefit from that money if you use it to build up your emergency fund.

It's a good idea to have enough money in your emergency fund to cover at least three to six months' worth of your normal expenses. Those savings are a great way to cover unexpected costs such as medical bills, car repairs, etc.

One last thing you should do is to write down any lessons you learn while preparing and filing your taxes this year. You never know what might make the process easier next year! After that, you can relax knowing you've made it through another tax season successfully.

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Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
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