When most people think of tax time, they no doubt think of the last minute crunch of standing in line at the post office late at night on April 15th. While you may never find yourself in that late night line, you probably have experienced the rush to get your online forms submitted or hurried to set up an appointment with an advisor. However, as tax season approaches, there are a number of things you can do to prepare in order to get a head start on your taxes.
Be prepared. At the beginning of the year, you will start to receive tax information and necessary forms in the mail that you will need when filing your taxes. Kiplinger.com advises that you begin to keep your eyes peeled for the following paperwork:
- W-2 will come from your place of employment and shows your gross income
- 1099 will come from anywhere you’ve received taxable interest or dividends (i.e., your bank, IRA, certificate of deposit, money market account, mutual funds, stock dividends, etc.)
- 1098 will come from the lender of your home mortgage loan
- 1099-G will come if you’ve collected any unemployment
- 1099-MISC will come if you worked as an independent contractor for any client that paid you over $600
Get organized. Once you start to receive these forms in the mail, the next thing you should do is to create a centralized location to save all tax-related information and paperwork. Whether it’s a file in your storage cabinet, a large manila envelope or a paper-clipped pile on your desk, it’s important that you keep all necessary paperwork together. This will ensure that you have everything you need once it’s time to start on your taxes and that no important paperwork is misplaced.
Figure out how you’ll file. Figure out how you will file your taxes. It is important that you decide this sooner rather than later in order to give yourself the time you need to choose a reliable computer program, an accountant or a tax professional that will file on your behalf. Will you:
- File your taxes the old fashioned way?
- Use a computer program to file electronically?
- Hire a tax professional to do it for you?
Decide on your deductions. Whether you have business and personal finances to account for or just one of the two, you should begin to separate your records, receipts and paperwork beforehand. Or better yet, keep them separated throughout the entire year and save yourself time when you’re preparing for tax season. Either way, you probably have deductions that will no doubt help increase your tax return or decrease the amount you owe. Here are a few common deductions to consider:
- Do you use your spare bedroom as a home office? You may be able to write off part of your home as a business deduction.
- Did you donate an old couch to goodwill? What about a bag or two of old clothes? Don’t forget to write these off as part of your personal charitable giving.
- Have you donated any money to a church or charity? If so, that amount can also be used as a tax deduction.
Keep current. Stay up to date with your state’s tax information by visiting the IRS web site. This site can help you locate the information you need about your city or state’s specific revenue and tax procedures, policies, tax forms, etc. Having the most current policies, procedures, tax forms and rates is essential when guaranteeing that your taxes are filed both on time and correctly.
Investing the minimal amount of time it takes to get a head start on your taxes is sure to save you a lot of time once April arrives. With a little preparation and organization, you’re certain to enjoy a sense of calm during tax season.