Now that the holidays have come and gone, many Americans are reminded they need to prepare for tax season. This isn’t a favorable time of year for most people, but it is crucial that everyone puts in the effort and files his or her taxes.
Preparing to do your taxes means collecting documents and information. It is tedious, time-consuming and, at times, confusing. Starting early means you’ll have time to find anything you overlook while you’re not under the pressure of the ticking clock. Plus, filing early will get your refund check in the mail that much quicker. Or, if you owe, you’ll have more time to prepare your budget for the hit that comes on April 15.
Know who you’re claiming
The first thing you’ll need to do in your tax preparation is figure out who you will be claiming, if anyone. Know you will need all their necessary information such as Social Security or tax ID numbers. If you are filing jointly with a spouse, you will need his or her name and Social Security number, too. Be prepared if you have a grown child in college (must be under 24 and a full-time student). If you’re paying for more than half of their living expenses, most parents will want to claim them. However, if they work, they also have to pay taxes and they cannot claim themselves in that case. This can end up costing a lot for a young person who is waiting tables to pay the bills.
Track your income
What the IRS really wants to know about is your income, so you will need W-2 forms for everyone you worked for in 2015. As Bankrate explained, everyone should have these forms by the end of January, so if you don’t receive one, get in touch with your current or former employer right away. Not including an income source can turn into a much bigger problem down the line. Put your statement of mortgage interest paid, issued by your lender(s), with your other documentation.
Simply collecting these forms isn’t enough; you’ll have to keep them in a safe place. You wouldn’t want to lose them before you file your taxes. To do this, designate a specific place in your home, like a manila envelope or a safebox. Or, take photos with your smartphone to ensure they are in one digital place and you can pull up the details at a moment’s notice, even if you’re not at home.
According to U.S. News & World Report, several apps can keep documents straight. Evernote allows users to take pictures of documents and classify them in different ‘notebooks.’
Keep your receipts
Shoeboxed is another great app, which categorizes receipts and assigns them the correct tax category.
Another app that helps organize receipts is Slice, which scans your Gmail account to find any receipts and tells you your purchase history. This is a convenient way to find any tax-deductible receipts deep in your inbox you may have forgotten about.
According to H&R Block, there are plenty of receipts that are worth holding onto until tax season, including:
- Home improvement purchases that made your home more energy-efficient
- Classroom expenses for teachers who teach grades K-12
- Charitable donations, whether cash or not
- Anything you needed to buy for your job, including travel expenses, uniform cleaning and industry publications
- Expenses for health and dental care
As always, consult your tax professional to find out exactly what you can deduct, but it’s best to have those receipts ready just in case.
If you haven’t saved all your receipts but pay for the vast majority of your bills and purchases electronically, they should all be itemized on your bank statements. You can print out the entire year of statements and highlight all potentially deductible expenses or use a software system such as QuickBooks that can connect to your accounts in order to export and categorize your transactions for you.
Decide how to file
Once you have everything in order, you will need to decide how you are going to file this year. You have two basic options: do them yourself or go to a professional. If you choose to do them yourself, there are many apps and software programs that can help you file them properly.
TurboTax and H&R Block both have apps that can help you file your taxes, but they suggest only using these if your income and deductions are fairly standard and simple.
According to The Simple Dollar, some of the best software to use includes TurboTax, H&R Block and TaxAct, each of which has a paid and a free version for federal taxes and a paid version for state taxes. Each of them offers step-by-step guidance, which is crucial when dealing with a system as complex as tax filing.
If you choose to file your taxes with a professional, there are some apps you may find helpful, too. The IRS2Go app gives users updates on the status of their return as well as information about where people can go for in-person advice, reported U.S. News & World Report.Call today for more information.
Published January 21, 2016