5 Tax Prep Tips For Everyone!

5 Tax Prep Tips For Everyone!

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It has been said that the only sure things in life are death and taxes. Taxes are paid throughout the year, but at least death is a one time event!

As sure as the calendar turns, we are gradually moving into the heart of tax season which has, technically, already begun. January is when the first of your many forms will arrive in the mail with a good number of taxpayers already in possession of their favorite tax software program.

Keep Your Money!

tax calculatorTo ensure that your tax filing goes as planned and that you get the largest possible refund or reduce your tax obligation, the following are some tips to help you get the job done right:

1. Make a file. I keep a manila folder handy where all of my receipts for the tax year are held until I am ready to begin my return. This means that my 2009 file is nearly completed while my 2010 file is in place to house receipts which will come in handy next year. Receipts are the proof you need to show to the IRS (if audited) that a certain expense was tax deductible.

How many receipts do you lose throughout the year?

2. Get those forms. You will need to gather your 1099 forms which can be sent to you for a variety of reasons.

If you are an independent contractor, and you were paid at least $600 from one company, then you should have a form showing what you were paid. 1099-G is for government payments, 1099-DIV is for dividends and distributions, and 1099-Q for payment from qualified educational institutions. There are many different 1099 forms, some of which may apply to you (visit irs.gov for more information).

If you are an employee, you will be looking for W-2 forms instead. You should have these types of forms in your hand by January 31, but the IRS seems to allow for a few weeks extension through February 15.

3. Start entering data. If you do your own taxes, meaning you use tax preparation software such as TurboTax, TaxAct, or H&R Block (formerly TaxCut) to complete your returns, then make sure that you have a current copy of the software available. Download federal (and state, if needed) and import your data from the previous year, if applicable.

Start entering at least some of your data in advance to get things moving. Save your work too, backing up a copy to your external hard drive or remote site.

4. Search for deductions. You can claim yourself, your spouse, and your kids, but what other exemptions or deductions can you (legally) take? A lot of people take the standard deduction and are thrilled with the results, but itemizing can save you even more money especially if you consider everything that can possibly be deducted.

Charitable cash and in-kind donations; medical expenses and health insurance premiums; property as well as state and local taxes; and interest expenses related to a mortgage are some of the key deductions you may be able to take.

5. Pull it all together. By the middle of February, you will most likely have all of the forms, publications, documents, receipts, and related stuff in one place. If not, contact your sources and have this information sent to you ASAP.

If you know that you are getting a refund, then complete your return as soon as possible and file it. Do the same with your state return. If you know that you owe the IRS money, complete your return as soon as possible. Why? Because over the coming weeks, you may think of additional deductions you can take which will save you money. Send off your return as close to April 15 as you can with your payment.

Review Your Work

Before you complete step #5 there is one thing you should do. Okay, two. Review your work. Review it again.

Sometimes that means getting everything done and coming back to it later. Whether a few hours or a few days, give yourself a chance to look at everything with a fresh set of eyes. You’re more likely to catch mistakes and, if you’re lucky, find some additional deductions to take!

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Categories: Tax Tips