Filing taxes can be less frustrating and less time-consuming when you're ready for the task.
Even if your tax situation isn't complicated, there's still documentation the Internal Revenue Service demands. But filing taxes doesn't have to be an ordeal. And it can be less frustrating and less time-consuming if you have all the material at your fingertips.
By being prepared, you'll be ready to file your return at the earliest possible moment (the IRS usually starts accepting returns around mid-January). And the earlier you file, the sooner you'll get your refund.
The key to a successful tax form is proper reporting. The IRS wants to know how much money you made so it can tax it. You need to know what you can put on your Form 1040 that will help you trim your tax bill.
To help you organize your tax paperwork so that you and the IRS will be happy, let's look at seven ways to help you get organized:
The IRS tracks every taxpayer through a Social Security Number. When you file your own returns, this isn't a problem. But if you drop all your data off at your accountant's office, make sure your Social Security number is in there, as well as your spouse's if you file jointly.
Don't forget the ID numbers of your dependents. You'll need those numbers, too. This includes everyone you claim, from elderly parents to infants. If your kids don't have their numbers yet, contact the Social Security Administration immediately. And don't forget the tax identification number of the person or business that takes care of the children while you're at work. You'll need it if you file for the child care credit.
A missing Social Security Number for any person listed on your return could cost you. The IRS could delay the processing of your return, slow down any tax refund or disallow a tax credit if you don't have the identification numbers to support it.
Because it's our income that the tax man wants a piece of, start thinking about the employment and income data you'll need to file.
By the end of January, every employee should get a Form W-2 from his or her boss showing how much was earned, how much was taxable and just what taxes were withheld. If you have more than one job, you should get a Form W-2 from each employer.
If you're an independent contractor, the company you worked for should send you a Form 1099-MISC showing your gross earnings.
When you're self-employed, you have a bit more work to get organized. Track down all receipts and documentation for business-related expenses, from the mileage records you kept when using your car for business to the office equipment and supplies you bought to the utility bills you paid to keep the home office lights on.
Wage income isn't the only earning that the IRS taxes. Are you saving money for your child's college, a new house or retirement? Good for you -- and the tax man. Interest earned on most savings accounts is taxable.
You should get statements from each of the account holders as well as official tax forms. Copies of the forms also go to the IRS.
Interest earnings are typically documented on Form 1099-INT. If you've branched out into stocks or mutual funds, you should get a Form 1099-DIV for each stock, mutual fund or money market account. Reports on the proceeds from broker transactions, if you use a broker, will be sent to you on a Form 1099-B.
Just like with your final paycheck stub, hang on to your year-end financial statements to compare with the official final tax documents.
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