You Should Get Organized Before You Sit down to Prepare Your Taxes

It’s that time of the year to file your taxes and you might be dreading it for many reasons! I want to focus on ONE thing to help alleviate any stress preparing your taxes may cause you each year…BE PREPARED! I know there can be a lot of paperwork depending on your situation; married, children, medical, self-employed, etc. To help you this year and give you a game plan throughout the year, let’s see what can be done:

Get organized.
Create a folder for each category and put the folders in a hanging file box or a specific filing cabinet drawer. Some examples of categories include: Income, Home, Business, Medical, Student Loans, Stocks, Mutual Funds, Retirement, Insurance/Annuities, Education, Donations, Tax correspondence, Child Care and Misc. Receipts/Deductions. Self-employed individuals may need additional folders with any business related expense/receipts; mileage records, office equipment/supplies, utilities for office, etc. Throughout the year, as you receive a bill, receipt or letter, place it in the appropriate folder. Then when tax time rolls around, you have everything in its place and you are ready to sit down and get started.

Start Early
The IRS Commissioner, John Koskinen, has warned that due to cut backs, refunds will take up to two weeks longer to process this year and the IRS help phone lines will be staffed with fewer people. So, get an early start on your taxes.

If you have had several different jobs throughout the year (or self-employed/contracted jobs), keep a record of the dates and amount earned to ensure you receive a W2 and/or 1099 in January. Keep a copy of the last paystub received to verify accuracy once received. Place all of this information in your “Income” folder that you created!

If you have a savings account or any stocks/mutual funds, you will get interest statements that you will need for your tax preparation. Store all your bank/financial information (even bank statements) in a 3 ring binder with tab dividers for each account you have. This will keep all of your bank information in one place and will make your finances easier to manage. Keep your year-end financial statements to compare for accuracy with your monthly statements.

Homeowners may be able to claim mortgage interest and real estate taxes as a tax deduction. You will receive a Form 1098 to show these amounts. You may also be able claim any personal property taxes (autos), if your state allows this.

Charitable acts or donations can also be rewarding at tax time. Be sure you get a receipt or note from the group you assisted (or donated items to) if it was over $250. If it is smaller, you can prove by a canceled check or bank/credit card statement. If you volunteer time, you can also benefit! Document the days you helped and you can claim 14 cents a mile that you drove to help the group! Once you get the receipt, make sure it is dated and drop it in your “Donation” folder. Designate a sheet of paper in your “Donation” folder to notate the date, mileage, location and the charity or cause to record mileage. If you have a planner (which I live by), you can make quick notes in it to remind you of when and where you volunteered.

Finally, I want to share what materials to have on hand when you file electronically (or to give to your accountant or tax preparer). If you created folders, this will be the moment you realize all of the organization paid off and was totally worth the effort! You could even go one step further and keep all of your information in a spreadsheet or accounting software.
Use this as a general checklist for those that apply to you:

  • Social Security numbers and dates of birth for your family and/or dependents claimed. If you have an infant, file for their Social Security number as soon as possible.
  • Last year’s tax returns.
  • Bank account number and routing number (for direct deposit – which is always quicker).
  • Income; W2’s and/or 1099s, alimony, business or farming, rental property, miscellaneous income (jury duty, gambling, medical savings account, scholarships).
  • Adjustments to income; Form 1098-E or T (student loan interest/tuition), supply expenses for teachers only, IRA contributions, qualifying energy credits, medical savings account contributions, self-employed health insurance payment, moving expenses, alimony paid, pension plans.
  • Itemized deductions/credits; advance child tax credit payment, child care, education (1098-T), adoption, mortgage interest, private mortgage insurance (PMI), and points paid (Form 1098), investment interest expenses, charitable donations, medical/dental expenses, casualty and theft losses (amount of damage/insurance reimbursements), miscellaneous (union dues, unreimbursed employee expenses, home business expenses).
  • Taxes you have paid – state, local, real estate, personal property, vehicle license fees.
  • Other: estimated tax payments made during the year (self-employed), prior year refund applied to current year and/or amount paid with an extension to file, foreign bank account information.

Once you have filed your taxes, combine all of your documents for that year and place in a file for future reference or possible audits. Empty your old folders to begin the process again. The IRS recommends you keep your financial records for 3 years unless you claimed a loss for bad debt and securities (7 years) or have under reported your income by 25% or more (6 years).

Whether you get some money back or you have to pay in, manage your money wisely for the New Year we were given! Put money in savings for a rainy day, start a college savings for your child, pay down debt or consider putting money in savings if you fear you will have to pay in next year to alleviate any financial stress it may cause for you. If any of this overwhelms you, give Apprisen a call at 800-355-2227 and we can help with a budget and financial planning!

For free tax help – Check out VITA (Volunteer Income Tax Assistance) to help anyone making under $53,000, persons with disabilities, elderly or limited English speaking taxpayers. Another program, Tax Counseling for the Elderly (TCE) offers help for those 60 and older. Contact your public library, Community Action Center, or even the United Way and they will tell you if there is an organization in your area that is offering free tax help.

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