Get organized for tax season: six tips(Read article summary)
Tax season will be less of a hassle of you have everything organized ahead of time. Here are six steps to make tax time a breeze.
Taxes are inconvenient, unavoidable, time-consuming, and can be frustrating. But letâ€™s figure out what you need heading into the 2013 tax seasonâ€¦
1. Get your numbers in order
First, get everyoneâ€™s Social Security numbers. Youâ€™ll need one for everyone on your tax return:Â yourself, your spouse, and everyone you supportÂ (dependents), includingÂ your parents or children.
If your children donâ€™t already have a Social Security number, get one now. Fill out theÂ Application for a Social Security CardÂ from the U.S. Social Security Administration website and locate your childâ€™s birth certificate. Youâ€™ll need to bring the application, birth certificate, and your child to yourÂ local office. Anyone 12 or olderÂ applying for an original SSNÂ has to beÂ interviewed in person.
2. Tally your income
Next, gather any documents that show the income you earned in 2012,Â as well as income earned by your spouseÂ ifÂ filing jointly. If youâ€™ve only had one job, no problemÂ â€“ you just need a W2 from your employer. You can see a sampleÂ here.
If youâ€™ve done contract or freelance work, youâ€™ll need a 1099-MISC if you made $600 or more from any company or client, according to theÂ IRS. You can see a sampleÂ here.
If you didnâ€™t work last year but collected unemployment, youâ€™ll need a 1099-G.Â If you received interest on savings accounts, made short or long-term capital gains, collected Social Security, or received a pension, youâ€™ll need proof of that as well, which youâ€™ll get from other 1099 forms.
See a pattern here? Proof of income you earned comes either on a W-2 or 1099.
Pull out last yearâ€™s taxÂ return and see what income you reported. If you had income from the same sources this year, makeÂ sure you have all forms in hand. If you donâ€™t have all documentationÂ by Jan. 31, call employers, clients, or bank reps and ask.
3. Find last yearâ€™s returns
As noted above,Â your 2011 tax return is a great guideÂ to prepare for 2012 filing.Â Unless your life has changed radically, youâ€™ll have many of the same sources of income, as well asÂ deductions likeÂ mortgage interest,Â property taxes,Â charitable contributions, etc.Â Checking last yearâ€™s return is a handy reminder of what youâ€™ll need to include this year.
If you canâ€™t find last yearâ€™s returns, you can order a copy online through the IRS website atÂ Order a Transcript.
4. Line up deductions
Now figure out what deductions you can claim for the year. There are loads of possibilities, but youâ€™ll need documentation to prove anything you claim. For example:
In "Tax Hacks 2012: 8 Easy-To-Miss Deductions"Â we found some commonly overlooked deductions that can save you big, such as child care expenses. If you paid for someone to watch your child, disabled spouse, or dependent family member while you were working, you might be able toÂ deduct part of theÂ cost. And then there are medical expenses:Â If yours exceeded 7.5 percent of your adjusted gross income, it will lower your taxable income.
Work from home? There are home office deductions, but they come with stickyÂ rules.
Other things are deductible too, like mortgage interest, business travel, and work-related education expenses. Check out the Internal Revenue Serviceâ€™sÂ Itemized Deductions siteÂ for a list. Take your time and go over it carefully. Remember, every $100Â of deductible expenses can mean up to $35Â inÂ refunds.
5. Pile on the contributions
If you were charitable last year, you may have earned yourself a tax discount.Â Charitable donations made to legitimate organizations (no individuals or political campaigns) are deductible.Â Donations can be in the form of cash, property, or stock, but the rules can be complex. Check out the IRSâ€™s "Eight Tips for Deducting Charitable Contributions"Â for a relatively easy-to-follow set of rules.
6. Plan for your refund
Last but not least, plan for your refund. Youâ€™ll get itÂ a lot sooner if you sign up for direct deposit. The IRS allowsÂ splitting your direct deposit into up to three different checking and savings accounts.Â Tax form instructions will tell you how to sign up.
Another way to speed up your refundÂ (in about 10 days, according to theÂ IRS), is toÂ file electronically.
And once you have that refund in hand, do something great with it. Check out this story we did last year, "Tax Hacks 2012: 7 Smart Uses for Your Tax Refund"Â for some inspiration, like building an emergency fund, investing, or starting a business.
Angela Colley is a writer forÂ Money Talks News, where this column first appeared.