Tax season isn’t far off, which means digging out receipts, tax documents, bank records, proof of income and the handy calculator that resides somewhere on your smartphone. But don’t fret: Doing your taxes doesn’t have to be stressful. The biggest step in tackling the task is the preparation. Getting everything in order well before the April 15 filing deadline is crucial, as tax rules can change significantly. And change they did, at least in two significant areas:

Coronavirus tax relief: New or amended laws may benefit you.
Changes to the Child Tax Credit will help many qualifying families get advance payments of the credit when they file taxes in 2022 (for the 2021 tax year). Specifically, half the total credit amount is being paid in advance monthly payments, and you claim the other half when you file your 2021 return. Note: The IRS emphasizes that the new advance payments are sent automatically to eligible taxpayers. You don’t need to take any action if the IRS already has your tax information. (See IRS publication 5534-E for details or visit IRS.gov/childtaxcredit2021.)

The other important change involves a new exclusion of unemployment compensation, which surged due to the devastating economic impact of the pandemic. The law took effect for the 2020 tax year, but still applies if you filed last year before the law was enacted on March 31, 2021. If your modified adjusted gross income (AGI) was less than $150,000 in 2020, the American Rescue Plan Act of 2021 does not tax the first $10,200 of unemployment compensation for each spouse paid in 2020. If what you received in unemployment compensation that year exceeded $10,200, that amount is taxable. In most cases, if the 2020 return you filed included the full amount of your unemployment compensation, the IRS will automatically determine the correct taxable amount of unemployment compensation and the correct tax. If you paid more than the correct tax amount, the IRS will either refund the overpayment or apply it to other outstanding taxes owed.

Print our tax prep checklist to help you get started—and follow the tips below for more insights on the documents you need to file taxes.

If you’re due a refund, get it faster than paper filers; use electronic direct deposit by providing your bank account and routing numbers. You also may need to supply information from your previous return, so keep last year’s tax filings, along with your records and prep docs, as a handy reference.

For many, the most important form is your W-2, which shows how much you earned and how much of your income was withheld for taxes. You should receive one from each of your employers for the tax year. Employers must deliver your W-2 no later than Jan. 31, so keep an eye on your mailbox and email. In fact, Members can sign up for a free service to track USPS mail sent to ensure delivery. The service is also handy when tracking anticipated refunds.

Making a budget can help you keep track of expenses all year. Deductions help reduce your taxable income, lowering the amount you may owe. But the key to claiming deductions is keeping your receipts and other vital documentation. Tax prep pro tip: Put aside these receipts throughout the year in an envelope or folder, and write on the back of each receipt any relevant info that you may forget later.

Reduce your financial anxiety further this tax season through a new AAA Discounts and Rewards partnership with TaxAct, an online do-it-yourself tax-preparation service. Members can save 25 percent off federal and state tax filings and additional purchase options including refund transfer, audit defense, full-service audit assistance and e-File concierge, which provides phone support for status changes of a filers’ return.

Do you freelance or own a business? If you’re self-employed, taxes aren’t automatically deducted from your take-home pay. Instead, you’re responsible for keeping track of what you owe in income taxes—and for paying on time, typically on a quarterly schedule. Keep in mind: It’s essential to document your business expenses year-round, as many of these can be deductions that will reduce the tax you owe.

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This information is being provided for general informational purposes only. The Auto Club Group does not assume any liability in connection with providing this information.

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