Ideas for Making Tax Preparation Time Easier

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Ideas for Making Tax Preparation Time Easier
Whether you expect a refund come time tax, or you are sure you'll be writing out a check to Uncle Sam, chances are that just the thought of tax season can give you a case of the hives. After all, it's not easy collecting all of that paperwork-- strewn out over the course of a whole year-- knowing that even a slight oversight on your part can cost you a lot of time, money, and stress down the line (audit, anyone?). Fortunately, there are some very simple things you can do to ease the worry. Here are some tips for making tax time easier:.
Create a checklist. As described later in this information, it is advisable that you organize your documents throughout the year, so that you don't have a menacing pile to tackle come tax time. What documents should you keep? That depends on your individual circumstances. The best way to determine which paperwork is worth organizing is to make a checklist, with an accountant's help. You may even draw from past tax returns for guidance.
Organize your tax-related records throughout the year. Purchase an accordion file, a small file box, or some other storage system that you can use to organize and file away your tax-related records throughout the year. Label sections for each type of record that you keep (credit card bills, gas receipts, and freelance invoices, for example), and then be sure to file things away as soon as they are in your hands, rather than let them pile up until they are a seemingly insurmountable mess.
Proof of income. You may not be aware of it, but it's likely that you have a number of different income sources. If you are a traditional employee, then you will most definitely have year-end W-2 forms from each of your employers. Additionally, it may be possible that you have any of a variety of 1099 forms: 1099-MISC (certain types of self-employment work), 1099-DIV (dividends), 1099-INT (interest), 1099-B (stocks and bonds traded through a broker), or 1099-SSA (social security received). In addition to income reported through W-2s and 1099s, you may also receive income from child support, alimony, rental payments, or other alternative means, in which case you must present evidence supporting such income (invoices, bank statements, or spreadsheets, for example).
Proof of expenses. Anything that you want to write off as an expense must be proven with suitable documentation. The most obvious expense proof is a receipt (beware of hand-written receipts, though); however, you may also prove expenses by way of things like canceled checks and signed spreadsheets. What kinds of things can you write off? While it is advisable that you should ask a professional before you attempt to write off anything questionable, a good rule of thumb is to remember that most moving expenses, college costs, medical bills, IRA contributions, real estate taxes, childcare expenses, and charitable donations are legitimate tax write-offs. Additionally, if you paid estimated taxes throughout the year, then you should provide your accountant with proof of payment.
Track medical expenses separately. This is best done on a spreadsheet, and any spreadsheet program like Microsoft Excel will do. Be sure to include headings such as Date, Service Type, Carrier, Cost, Method of Payment, and Ancillary Expenses. At the end of the year, you can simply choose applicable headings and print up the spreadsheet for your accountant's use.
Use tax preparation software. Even if you choose to hire an accountant or bookkeeper to help you through tax season, good tax preparation software can at least guide you through preparing necessary paperwork and gathering supporting documentation.
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Whether you expect a refund come time tax, or you are sure you'll be writing out a check to Uncle Sam, chances are that just the thought of tax season can give you a case of the hives. Here are some tips for making tax time easier:.
As described later in this information, it is advisable that you organize your documents throughout the year, so that you don't have a menacing pile to tackle come tax time. While it is advisable that you should ask a professional before you attempt to write off anything questionable, a good rule of thumb is to remember that most moving expenses, college costs, medical bills, IRA contributions, real estate taxes, childcare expenses, and charitable donations are legitimate tax write-offs. Additionally, if you paid estimated taxes throughout the year, then you should provide your accountant with proof of payment.