Whether using a tax preparation service, an accountant or a software program designed for "do it yourself" filing, starting long before the New Year begins will make the process easier and perhaps will also save on tax dollars.
Organization of Tax-Related Data
Previous tax returns can be helpful as reminders of what has previously been reported. Use them as a checklist for items that should be reported and deductions that were taken. .
Setting up separate folders for documents that will be received from places from which money was received. These might include:
- W2 forms from employers
- Mortgage interest
- Real estate taxes
- Interest earned from dividends
- Stock information
- Social security income
Folders from tax-related monies paid out can include:
- IRA contributions
- Charitable donations
- College tuition
- Alimony
- Forms 1099
- Social security
- Medical expenses
Documentation Requirements
Anything that is placed on a tax return must be backed up by documentation. Examples are:
- Deductions of charitable contributions for over $250
- Gains or losses from investments in real estate or stocks
- First time home buyer credit or anything similar that can be used
For those who are self-employed, profit and loss statements should be prepared before the end of the year to make sure there is documentation for income and expenses.
Internal Revenue Assistance
The Internal Revenue (IRS) has more detailed information about filing tax returns. It includes answers to information and questions such as:
- What should I do if I made a mistake on a federal tax return already filed?
- What is the age limit on claiming a child as a dependent?
- What are itemized deductions/standard deductions?
- What interest, dividends or other types of income must be included?
- Are there taxes on social security payments?
- What is the Earned Income Tax Credit?
Each year the IRS updates the latest changes in tax regulations which can be found at Highlights of Recent Tax Changes.
Using a Tax Preparer
The earlier all the pertinent information is organized and gathered, the sooner an appointment can be made with a tax preparer. When going over the forms, create a list of questions for anything that is not understood or may be questioned by the (IRS)
Ask in advance about fees and avoid a "rapid return" refund as the fee for this can be quite high. Filing electronically will usually bring a refund within two weeks.
Whether tax software is being used to file tax returns or it will be done by a tax preparer or a certified public accountant, the sooner the process is begun---creating a check list, organizing and documenting income and expenses---the easier the tax season will be.
Join the Conversation