If you have followed my advice all year long, all your paperwork is in one place -- be it a shoebox, envelope, or drawer -- ready to pull out so you can do your taxes. By having all your documents in one place, you are one step closer to filing your return. Remember my first rule of tax return time? The earlier you file, the sooner you will get your refund!
If this year is like prior years, tax time, and by tax time I mean tax refund time, will be here sooner than you expect -- but not soon enough for the more than 75 percent of taxpayers who get a refund every year. Even with all your documents in once place there is still a lot of organization to do. By spending some time organizing before sitting down to prepare your return, you will be less likely to make a mistake or miss a tax deduction, tax credit, or other benefit. Putting your taxes together can be overwhelming. The IRS estimates the average person spends almost a full day compiling their tax return and that is for a regular simple Form 1040. Need a Schedule C for business or a Schedule E for rental properties and you can add about 10 hours to that number. If you live in a state with an income tax you can add more hours for your state tax return. Here are a few simple steps you can take to getting your paperwork organized as easy and fast as possible.
Before you sort the box, make sure everything you need is in there. A quick checklist would include:
• Last year's tax return
• Social Security Number and birthdate for everyone on your tax forms
• Previously paid taxes: self-employment tax, estimated taxes, property taxes, etc.
• Documents Received: W-2s, 1099's, 1098's, and related tax documents.
• Interest paid on mortgage or student loans
• Charitable donation cancelled checks or receipts
• Retirement contributions (401k, IRA, self-employed retirement accounts).
• Mileage records
• Medical costs and receipts (if you can deduct them)
• Child care and education costs
• Rental property records (income and expense)
• Bank account and routing numbers if you pay electronically
• NEW! Health Insurance forms 1095s or Marketplace Certificate of Exemption
To me, the fewer categories the better. Income, Deductions, and Other documents (taxes paid, last year's return, health insurance forms, and important personal information) works, but maybe you want to break it down a bit more. For example, in your Income folder you could have W-2s, Bank Statements, Dividend Statements, and Rent Received. In your Deductions folder, include your charity donation receipts, mileage records, and 1098s.
Next, find a tax resource website or smartphone app you like. IRS.gov has basic tax information including forms, frequently asked questions, quick calculators to help see if you qualify for various tax benefits, and other tools. Big tax company websites often have tools and resources in user-friendly terminology. And there are lots of tips to be considered, from selecting an appropriate tax preparation software to deciding if or when you should seek professional services. There are many tools and helpful information that can jumpstart your tax return preparation and get you all of your money back faster this year. With all the cumbersome organization out of the way, you will be able to file your tax return, if you do not have to wait for forms or other information, early. And the earlier you file, the earlier you can get your tax refund.
Finally, as complex as taxes are, whether you do your taxes on your own or you get help, start early. If you do not have a relationship with a tax professional -- start now and get one. Even if you just have some questions now or in the future, or you want a review of your prior or current year tax return or full help preparing. Having a relationship with a known and trusted tax return professional can help you. As complex as taxes are now, and likely to be for a long time, get a tax pro in your contact list. It will get you more money over time.