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 IRS uses Social Security numbers to track individuals, so keep your own number, as well as those of your spouse and any dependents, 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 of these in a central location, such as a filing cabinet or a single folder, and label it clearly with the year. Also, keep any other income forms, like a 1099 if you're a contractor, or your year-end bank statements.
Items like interest on a house mortgage are tax-deductible. If you are making payments on a mortgage, you are likely paying some form of interest, which means it can be a tax deduction. Make a list of all the loans you are paying and look for statements regarding your payments.
Any charitable contributions to a qualified charity count as tax deductions. If you 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 this year's forms but also your previous year's taxes. Many state and federal websites allow you to file your taxes for free, as long as you have your information from last year for verification.
Do you have a 401(k) or another retirement account? How about a savings account or a college fund for your kids? Make a list of all the places where your money is sitting. The IRS will definitely know about it, so you might as well too. This will allow you to start looking for areas where you can find deductions.
Start early by picking your accountant, tax professional, or software. Begin filling in your information and give yourself plenty of time to see where the numbers lie, so you can make adjustments as necessary.
Online tax services provide excellent education and very competitive pricing. You can learn a lot by doing your taxes on your own. It will help you understand what you need to do in the coming year to better manage 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 send them 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 junk mail, start really noticing what comes in your mailbox. Often, you'll get a statement letter from somewhere you forgot you had money.
Do you have a Flexible Savings Account or Health Savings 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 or 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. These include new forms for claiming the premium tax credit for eligible individuals who bought coverage via a government marketplace (exchange), and for estimating the shared responsibility payment for those who did not carry coverage and, therefore, do not qualify for an exemption.