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Cut your tax-season stress with some early preparations

The Time To Pay Taxes Concept And 1040 Income Tax Return Statement

The 2024 tax season is fast approaching, and even if your tax-filing deadline is months away, it’s never too early to start preparing for the must-tackle task.

Waiting until the last minute to get ready for filing, of course, can lead to unnecessary stress for taxpayers. In fact, according to a 2023 study, nearly half of American taxpayers report feeling stressed when they think about their taxes — but preparing in advance can ease the anxiety.

Ready to get your tax-filing preparation started? Looking for answers to commonly asked tax-related questions such as “What is the standard deduction for 2024?” and more? To help you get ready (and cut the tension that tax-season procrastination can bring), we’ve put together the following guide to preparing for the upcoming 2024 tax season.

 

2024 tax deadlines

For most American taxpayers, the 2024 tax season concludes on April 15, 2024, when the vast majority of returns are due to be submitted to the Internal Revenue Service (IRS). And to help you prepare for your filing, the IRS offers a range of taxpayer resources and tips on its website.

While April 15 is the latest date for most taxpayers who owe taxes to file without facing the possibility of a penalty, the IRS typically begins accepting returns as early as late January. Of course, filing early can bring substantial benefits — it can not only help lower your stress levels, but also set you up for quicker IRS processing and an earlier receipt of your tax refund (if one is due).

Those who file for an extension are given six additional months (until October 15, 2024) beyond the April 15 deadline to file their completed tax returns. Extending the filing deadline, though, does not mean the payment deadline is extended. If taxpayers believe they owe taxes, they must estimate the amount owed and pay it when submitting their extension form.

 

Free options for filing taxes

An estimated 100 million American taxpayers are eligible to file their tax returns free of charge, and the options for doing so include:

  • Free, in-person tax preparation (for those who qualify): For those who meet specific eligibility requirements and need assistance preparing their tax returns, the IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, along with the AARP Foundation’s Tax-Aide program, provide free, in-person tax-filing help from IRS-certified tax preparers. (Requirements include having an annual income of generally $60,000 or less, having a disability, possessing limited English-speaking skills or being age 60 or older. Check the links above to see full eligibility requirements.)
  • Free remote, full-service tax preparation: Those who meet specified income requirements can get free remote tax-preparation help from IRS-certified volunteers via the United Way’s MyFreeTaxes program (for filers who make about $60,000 or less annually) or the IRS’s GetYourRefund program (for filers who make $66,000 or less annually).
  • Free self-service tax preparation: Filers who make $73,000 or less annually may be eligible to use the IRS Free File program to prepare and submit their tax returns using guided, online tax-preparation software.
  • Free filing for service members: Qualifying members of the military and their family members who meet specific requirements can file their taxes for free with the help of software or one-on-one help through the MilTax program.

 

5 basic steps to tax-filing success

While the tax-filing process can vary from person to person, in most cases, it generally involves the following five steps — and is much easier if you’re prepared with the right documents and information in hand:

  1. Gather the needed documents and information:

    The various forms and details needed for tax filing typically include:
    – Proof of identity
    – Personal details like the Social Security numbers and birthdates of immediate family members
    – Income and investment information such as your W-2 form(s), which is typically provided by the taxpayer’s (or taxpayers’) employer(s) and shows the filer’s (or filers’) income over the tax year; information about any contributions to retirement accounts; information on any educational expenses paid such as those for tuition and textbooks; documentation on any payments made to student loan debts and/or a home mortgage; any 1099 forms provided for income earned beyond wages, salaries and tips; and documentation regarding any other income such as award money and gambling winnings
    – Information on any medical expenses paid over the course of the tax year
    – Documentation of health insurance coverage (Form 1095, typically provided by employers)
    – Documentation of any Social Security benefits claimed over the course of the tax year
    – If applicable, documentation of any self-employment information such as business expenses and income, mileage records, any installments already paid on a tax bill, and details on the size of any in-home working space if you plan to take a home office deduction
    – Donation receipts for taxpayers looking to claim a tax deduction for charitable donations
    – Details on any already-paid taxes such as property taxes, as well as any state and local income taxes paid on personal property such as a new vehicle
    – Details on any foreign bank accounts the taxpayer(s) may hold and their peak values over the course of the tax year
    – Additional information such as routing and account numbers for those seeking to have their tax refunds sent via direct deposit

  2. Make your deduction decision:

    You’ll need to decide whether to take the standard tax deduction or itemize your tax deductions. (Find more information on this item below.)

  3. Choose whether you’ll be filing online or in-person with a tax preparer.

  4. Complete the required tax forms.

  5. Lastly, submit your completed return.

    This can be done using tax-preparation software or via an IRS-authorized e-file provider. Returns can also be submitted by mail, but this method is not encouraged, as it can take several weeks longer to process and can substantially delay the issuance of any tax refund owed.

 

Understanding the top tax deductions and credits

Some of the most common tax deductions and credits that taxpayers and tax preparers can use to lower a filer’s tax liability and/or debt include:

  • The standard deduction: Available to most taxpayers, this type of deduction can simplify the filing process by offering a specified deduction in taxable income based on the taxpayer’s (or taxpayers’) annual earnings. (The tax year 2023 standard deduction is $13,850 for single filers, $20,800 for heads of household or $27,700 for joint filers.)
  • Homeownership deductions: These deductions available to homeowners offer a reduction in taxable income for any mortgage interest and property taxes paid.
  • Healthcare-related deductions: Available to taxpayers whose healthcare costs exceed a certain percentage of their adjusted gross income, these deductions are available for such expenses as physician visits, qualifying medical procedures and prescription medications.
  • Education-related credits: Offered to students in an effort to reduce the hardship of pursuing a higher education, these credits offer tax benefits for qualifying education-related expenses such as tuition, as well as course materials such as textbooks that had to be purchased. Benefits are also available to offset the education-related expenses of those who pursue lifetime learning opportunities.
  • The Earned Income Tax Credit (EITC): Geared toward taxpayers with low to moderate annual incomes, this credit can substantially reduce the tax debt owed (or even qualify the recipient for a refund) and is meant to boost the financial well-being of the taxpayer.
  • The Child Tax Credit: This credit offers a reduction in taxes owed for each qualifying child in the taxpayer’s household. It is meant to recognize the financial responsibilities that come with raising children.
  • The Child and Dependent Care Credit: This credit, available to taxpayers covering the costs of childcare while working or looking for a job, is meant to acknowledge the financial challenges of balancing career and family responsibilities.

Note: This article is designed to be a primer for taxpayers looking to prepare for the 2024 tax season — it’s by no means meant to offer advice or be a comprehensive guide to preparing or filing your taxes. If you have questions about how you should proceed with any of your tax-filing decisions, be sure to consult a professional.

Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.

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AnnualCreditReport.com is the only source for free credit reports authorized by the federal government. Every 12 months, you can get a free copy of your credit report from each agency.

Your credit report has your credit history for all of your credit accounts as well as any credit inquiries and public record court information such as collections. In addition, the report provides personally identifiable information such as your name, address, and employment.

Be sure to carefully review all three reports to identify any problem areas that you may need to clean up prior to applying for a mortgage. If there is any incorrect information, follow the reporting agency’s rules to correct it or add a notation to the report to explain the situation.

Your FICO Score is a score combines data from several areas include payment history, the amount owed, length of credit history, new accounts. Many lenders use this score as a guide. This score is not provided as part of the free annual credit report.

Learn more about how your credit score impacts your ability to secure a loan.

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Couple looking over finances

Primary considerations for setting your housing budget require an assessment of your income, debt and current savings for the down payment on the home. The following are generally recommended guidelines; however, you should meet with an Arthur State Bank lender to get personalized mortgage information.

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Couple meeting with lender

The pre-qualification/pre-approval letter is included with any offer you make on a house to inform the seller that you have met with a mortgage lender and you are prepared to make an offer. The letter states that based on certain assumptions, the bank is prepared to lend you up to a specified amount of money for a home mortgage.

When choosing a loan officer, we recommend going local to work with someone who understands your community’s real estate market. This blog on first-time home purchases includes questions to ask your lender that may be helpful when preparing for your meeting.

Helpful Resources:

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Realtor shaking hands with a client

When a house is sold, the seller typically pays real estate commission to both the listing agent and the selling agent. It is extremely beneficial for the buyer to use their own real estate agent. Loan officers can often recommend selling agents in the area; ask your officer about realtor referrals when discussing your loan.

A good realtor will know the local market and can help you find an ideal home based on your budget, location and desired features. During your search, understand that you will most likely need to compromise on some items, so it’s important to identify your critical needs versus your wants.

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Couple searching online for a home

Additionally, when you start with the house search and work backwards, homes can often go off the market while you’re completing steps 1-4. While browsing homes immediately can be tempting, we recommend following these steps in order so that, once you find your dream home, you’ll be well-positioned to take action immediately.

When you find the home you want and you think you are ready to put an offer on it, you will want to make sure you have all the information you need to make a solid offer.

  • Evaluate the neighborhood.
  • Drive by the house at different times of the day.
  • Examine how other houses in the neighborhood are maintained.
  • Consider any potential traffic or other disruptive noise.
  • Is there ample parking for you and visitors?
  • Read the details in any Homeowner Association agreements (HOA fees and rules).

Make sure to do a preliminary check of house details:

  • Check the water:
  • Does it have good pressure?
  • How long does it take to get the water hot?
  • Is it well water or city water?
  • Turn light switches on and off.
  • Open and close doors and windows to make sure they work properly.
  • Review previous utility bill expenses.
  • Consider the property tax bill.

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Family meeting with realtor at new house

When writing an offer contract, be sure to pay attention to all of the details.

Offer Price:

Your agent should do a market analysis that pulls data on recently sold comparable houses. The best comparisons will come from the same neighborhood.

If you are asking for the seller to pay some of the closing costs, remember that this cost plus the sales commission determines the net amount you are offering the seller for the house.

Work with your agent on your negotiation strategy. There are many things to consider, such as how badly you want this particular house, whether it is a buyer’s or seller’s market and an assessment of the seller’s motivation to get the property sold.

There isn’t one best strategy.

Be sure to document in writing everything you want included with the house, such as appliances, etc. Your agent should guide you through the contract step-by-step.

Contingencies:

  • Home inspection.
  • Mortgage.
  • Final walk through (24 hours prior to closing).

Proposed closing date. Typically, this is 30-45 days from an accepted offer.

A good-faith deposit is required for the offer. This is typically between 1-10% of the purchase price of the house. The deposit is kept in escrow until closing and the money is applied to the purchase price of the house at closing. If the house does not close due to one of the contingency clauses, the buyer receives their money back. However, if the buyer decides not to close on the property, the seller may get the deposit money.

Attach your pre-approval letter to the offer.

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Two people in professional meeting

The clock starts ticking for everything documented in the contract, including mortgage application, inspections and closing date.

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Woman advising other woman on mortgage application

You will need to decide which mortgage to select prior to the application.

Plan for the following potential fees:

  • Application fee (many banks and mortgage companies charge an application fee; however, there is not an application fee at Arthur State Bank).
  • Credit check.
  • Appraisal (may be paid at closing).
  • Loan origination fee (paid at closing).

Once you have approval for your loan, make sure you don’t change anything that will impact the status of your mortgage. Banks do a final check on credit and jobs just prior to closing, so now is not the time to change jobs or make another purchase on credit such as a car or furniture.

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Home inspector going over findings with home owner

Depending on the size of the house, an inspection can cost on average between $300 to $1000.

Many real estate contracts specify how problems uncovered in the inspection will be resolved, up to a certain dollar amount. Should necessary repairs exceed that amount, the buyer has the option to cancel the contract without penalty and receive their deposit money back. Another option is for the buyer and seller to renegotiate who will pay for additional repairs.

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Woman happily holding keys to her new home
  • Homeowner’s insurance is required by the lender prior to closing on the loan.
  • Turn on utilities in your name, effective the closing date.
  • Change your address with the U.S. Postal Service.
    • Make moving arrangements.

Three days prior to closing:

  • You should receive your final Closing Disclosure from the closing agency. The final Closing Disclosure shows a column for the seller and a column for the buyer. All closing charges and credits for both the seller and the buyer are documented in the closing statement.
  • Review the closing statement for accuracy prior to coming to closing.
  • The final amount in the buyer’s column shows you the amount of money you need to pay at closing.

The closing office will provide specific payment instructions. Closing funds have become recent targets for cybercriminals. If you are asked to use a wire transfer, call the office and ask to speak to someone you have been working with to double-check the instructions.

Closing day:

In South Carolina, the closing will usually take place at the attorney’s office. Everyone signing for the mortgage must be present to sign the closing paperwork. Make sure you bring the following:

  • Cashier’s check or proof of payment for wire transfer.
  • Driver’s license.
  • Checkbook, just in case there are any additional items that were not on the closing statement.

Be sure to understand this information:

  • How and when you will pay:
  • Your mortgage.
  • Your property taxes.
  • Your homeowner’s insurance.
  • Any HOA dues.
  • Who to call with any questions.

The best practice is to go through the homebuyer’s roadmap in this sequence. However, if you jumped ahead early in your journey, just circle back to address the steps you missed.

Arthur State Bank’s loan officers are closely tapped into local real estate markets and experts at helping clients get what they need on terms that work for them. We also offer mortgage specials for first-time homebuyers.

To start planning your journey to your dream home, try out our mortgage calculator. If you’re ready to talk to a loan officer, contact Arthur State Bank to request personalized mortgage information today. Don’t forget to ask about our first-time homebuyer offer.

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