Well, it’s that time again — tax time. It’s time to gather all those rumpled receipts from the shoe box and straighten them out. Whether you are doing your taxes or having the service performed by someone else, getting your papers in order beforehand will help. Here are some tips for tax preparation:
1. Gather all your tax documents. Most companies have mailed out W-2 tax statements to employees by the 15th of January. By the last of the month, you should have received what you need from employers, banks, mortgage companies, and investment companies. Each document represents information that needs to be recorded on your tax forms. Missing documentation could result in a lost deduction or tax credit that will cost you money. A good rule of thumb is to file the documents in a folder as soon as they arrive. This way, they are easier to find when the time comes.
2. Know your tax ID numbers. The IRS identifies each taxpayer by a tax ID, usually your social security number. Each dependent on your tax return will need their social security number recorded on the tax forms. This includes the social security number of the childcare provider for your children.
3. Know your filing status. There are five categories for tax filing. You may qualify to use more than one status. To decide, choose the lowest taxable income or the most significant tax refund.
4. Decide if you are going to itemize. Itemized deductions are not necessary on the tax form unless you will benefit significantly from doing so. The term scares people, but there is no need to worry. Most people can use the standard 1040 tax form and not have to bother with forms for itemization.
5. Know what’s new for the year. Tax laws, deductions, and credits are changed or added each year. The sheer volume of tax laws on record would curl your hair. You could never know them all, but familiarity with the latest changes can make a difference to the amount of refund that you receive.
6. Invest in a suitable software program. Many tax preparation centers use tax software to help you organize your tax return. The difference is that they have had more math experience than you have. Usually, these programs have online support to answer any questions. A line-by-line description is given at every stage of the process for clarification.
7. Make a copy of all of your documents and forms. It is recommended that taxpayers keep a copy of their tax returns for at least three years. God forbid, but if something happens to the tax forms you filed, there would be no way to duplicate the information quickly without a copy. Mortgage lenders require copies of previous tax forms for their application.
Tax time can be stressful for the best of us. Having all of our ducks in a row, so to speak, makes the process less daunting. Being organized makes filing easier without worrying about missing deadlines.
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