Being Well Prepared for Taxes

If you are like most of us, tax time takes you by surprise every year. The hectic scramble of the holidays is finally over, and you want a little well-deserved down time, but before you know it, January is over, the W-2’s or 1099’s are showing up in the mail and that April 15 deadline is looming.

Tax time can be a very stressful time for anyone, even without the deadline. There are always so many questions. Will you get a refund, or will you have to send in more money? Should you itemize deductions or take the standard deduction option? Should you and your spouse file separately or together? Should you hire a tax professional, or can you manage on your own? However you answer these questions, a little advanced preparation will go a long way toward smoothing your sailing through the rough seas of our federal income tax process. Here at PaydayLoansCashAdvance.com, we’ve compiled these helpful tips to being prepared at tax time:

The earlier you start the better

Ideally, you should start your planning for tax season on January first the year before. Start by setting up a filing system. Nothing can be more frustrating at tax time than trying to locate all of your receipts and documentation. Make a file folder for each separate category that you will need. Even if you’re unsure you will need the receipts — for travel expense, as an example — start the file and keep them anyway. It’s better to have too much data than too little when it comes to your taxes. Keep documentation for anything you may be able to deduct when itemizing, such as receipts for charitable donations, medical and dental expenses, and money spent on business travel expenses. You may also want to include categories for local taxes, the business use of your car and educational expenses.

A log for your car is also an important tax document. If you are able to take the home office deduction, some of your travel expenses may be tax deductible. To take this deduction, however, you need accurate records of exactly when and how you used your car for business. This includes having the correct odometer reading for the start of the tax year and a record of how far you traveled on each business-related trip. The only way to do this accurately is to start your log on January first of the year you plan to take the deductions.

If you have a child in college and plan on taking one of the deductions available for college expenses, it is important to have your student save all their receipts for course-related expenses. Items specifically required for a given class, such as books, lab supplies, and even art materials, may be tax deductible, but only if you have proof of what was purchased and how much it cost. If you plan on taking this deduction, just remember to start early and nag often. Saving receipts isn’t high on the typical college student’s to-do list, so it will take a few reminders from you to get them in the habit.

It’s never too late to make up lost time

If you didn’t start your tax preparation for last year’s taxes last year, don’t despair. There are still plenty of time-saving strategies you can use to your advantage to get a jumpstart on filing. The first step is to determine what forms, publications and schedules you will need to file your taxes. Nearly all forms and publications are available in PDF format at the IRS website and can be printed out as needed. If you don’t have ready access to a printer, you can order your forms from the IRS. Every tax payer can order up to ten different products free of charge. Order early, however, because it can take up to two weeks to get your forms through the mail.

Even if you plan on printing out your forms and schedules, consider ordering Publication 17 from the IRS. It is a large document — over 300 pages — and much too long to print out in its entirety, but it contains a very useful overview of most of the tax laws and requirements that the average taxpayer will need to understand to properly prepare taxes at home. Topics that can be found in Publication 17 include filing information, social security income, selling a home, retirement accounts, and “What’s New,” a listing of the most relevant changes to the tax code for that year.

Next Step

The next step in tax preparation is to gather all your documents. You will need all of your and your spouse’s W-2’s, a 1098-T if you have education-related expenses, a 1099 if you have income earned as an independent contractor as well as any receipts you plan to use to itemize deductions or claim a home office. Remember, too, that receipts are only one place to check for expenses. Go through your checkbook and your credit card statements as well. These will show expenditures you made for business, medical care or even energy saving appliances, all of which can lower your tax liability.

Filing

Once you have all your documents in order, research your e-file options. While the IRS will still accept a tax return sent through the postal service, it no longer automatically sends out paper forms and strongly encourages taxpayers to prepare taxes using an electronic service. E-filing is often the best way to file. It eliminates common math mistakes, speeds your refund and can even help you find deductions you might have otherwise overlooked. Many taxpayers will also qualify to e-file for free. Check the IRS website to see if you are one of them.

Smooth sailing

Plan ahead, organize your papers and check out the valuable resources available on the IRS website. If you take these few simple steps, your tax filing experience will be, if not exactly pleasant, at least more bearable.

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