Top Ten Tips to Prepare for Tax SeasonThe saying says that there are only two certainties in life: Death and Taxes.
Few things strike more fear into the hearts of most people than knowing that tax season is coming up. It doesn't have to be scary though. Knowing that it comes every year and that the steps are usually very similar each time, your best bet is to keep your information organized and be prepared when the taxman comes calling.
Below is a list of the best steps you can follow to prepare for filing your annual income taxes.
The Top Ten
The IRS uses social security numbers to track everyone so keep your own, your spouse, and any dependents' numbers in a secure location for easy retrieval.
Each employer is required to send you a W-2 form by the end of January. Keep all these in a central location (like a filing cabinet or a single folder) and have it clearly labeled with the year. Also keep any other income forms like a 1099 if you're a contractor or your year-end bank statements.
Things like interest on a house mortgage are tax deductible. If you are making a payment on it, chances are you are paying some form of interest and that means a tax deduction. Make a list of all the loans you pay and look for statements regarding your payments.
Any charitable contributions to a qualified charity count as tax deductions. Have old clothes, furniture, cars, etc. give them away before December and you can count their value toward your taxes.
You'll want to save organized copies of not only the forms this year but of your previous year's taxes. Many state and federal websites let you file your taxes for free as long as you have your information from last year as verification.
Do you have a 401(k) or other retirement account? How about a savings account or college fund for your kids? Make a list of all the places your money is sitting. The IRS will definitely know about it so you might as well too so you can start looking for areas to find deductions.
Start early by picking your accountant, tax professional, or software. Start filling in your information and give yourself plenty of time to see where the numbers lay so you can make adjustments where necessary.
Online tax services provide great education and very good pricing. You can learn a lot by doing them on your own. It will help you understand what you need to do in the coming year to better manange your tax plan and save money.
If you think there's a chance you'll need to wait longer than the April 15th deadline for some reason, get your extension forms ready and sent in early to avoid any late fees.
Most tax forms can be downloaded but many are sent directly to your mailbox. Even if you think it may be junkmail, start really noticing what comes in your mailbox. Often you;ll get a statement letter from somewhere you forgot you had money sitting.
Do you have a Flexible Savings Account or Health Saving Account? Some of these accounts roll over to the new year but many don't. If the money you've invested is going to disappear after the new year, make those doctor/dentist appointments so you don't lose their value.
Being up to date with new tax rules helps as you won’t be caught unaware. The individual healthcare mandate brought in a slew of changes, which includes new forms for claiming the premium tax credit for eligible individuals who bought a coverage via a government Marketplace (exchange) and for estimation of the shared responsibility payment for those who did not carry coverage and hence do not qualify for an exemption.