How to Prepare for Tax Time
At the beginning of a new calendar year, it means tax time for the previous year is right around the corner. Whether you wait until April 15 to file or prefer to do everything in advance, the whole process will be so much easier if you're prepared when the deadline rolls around. Better yet, have everything together and beat the rush at your accountant’s office and the post office, and vow to file your taxes in advance this year. You’ll still have until April 15 to pay them.
To prepare for tax time, follow the steps below to make sure the only surprise at tax time is how much of a refund you’ll receive.
List your sources of income. Of course, you’ll include your current employer, but also list, if applicable during the past tax year, your past employers, retirement accounts, bank accounts drawing interest, stocks drawing interest and mutual funds.
More advice about taxes on the AG Blog:
Start watching the mail like a hawk. From the end of December until the beginning of February, open every piece of mail you receive, unless it’s obviously from a credit card company. You could be receiving mail from your employer, former employers, mortgage company, investment firms, banks, charities you’ve donated to and more.
Set everything tax-related aside. Designate a folder labeled “Taxes” and the year, and put everything relevant to filing your taxes in it, from documents to pay stubs to leads on tax professionals.
Research tax preparers in your area. If having your taxes done quickly is your biggest priority, go to national chain tax preparers such as H&R Block or Liberty Tax Service, which often promise to have your refund in your hand by the time you walk out the door. If you want to develop a future tax plan, look for Certified Public Accountants who specialize in small business or personal taxes.
Alternately, look for tax software if you want to prepare your taxes yourself. If budget is a concern, visit Free File for IRS-approved and endorsed e-filing tax software. If you make below $57,000, your federal return is free.
Reconsider your withholding allowances. If you owe money each year, reduce your withholding allowances to the bare minimum – one or even zero. However, the same holds true if you’re saving for something big – you may want to increase your withholdings to two or three to receive more money in your paycheck.
Prepare for next year. If you ran into documentation trouble during this year, prepare for next year by saving detailed records of invoices, bank statements and hospital or moving receipts. Additionally, save travel and entertainment expenses if you run a small business.
Photo credit: Shutterstock / Cris Kelly