Jan 26, 2012

Tips for Organizing and Filing Your Taxes

It's the start of tax season, and unfortunately the best time for preparing and organizing your tax documents is the year before. But if all you have right now is a big mess of papers, then here are some suggestions for making the seemingly overwhelming task of doing your taxes manageable:

Tips for Filing and Organizing Your Taxes
  • Gather all of your documents. Taxes = lots of papers. For several weeks, the mail brings 1099s, W2s, and other tax-related documents. You may also have receipts for deductible donations and expenses. Getting everything together in one place is the first step. Be thorough. Any omission could cost you money - either because you failed to take a deduction to which you were entitled, or worse, because you failed to report income and the IRS has found out!

  • Create a workspace where you can spread out. You're going to be creating piles, so a wide, flat surface is your best friend right now. Be sure to remove spillable items (like that giant Diet Coke) out of the way.

  • Create categories based on your tax return. Some tax returns are more complicated than others, depending on your types of income and the type of return you file. General categories are income and deductions. Some documents, like your W2, may include information for multiple categories, and I tend to separate those out since there aren't many of them.

    My husband and I file a 1040, and I create categories based upon the sections on the form itself. Our income is separated into the following categories: his salary, investment income, prizes, my miscellaneous earnings (e.g., from surveys), and blog earnings. Our deductions get separated into the following: mortgage/tax deductions, charitable deductions, and other (e.g., dependent care expenses).
What you do next will vary based upon whether you file your own return, or whether you pay someone to do it, and just how much paper you have to deal with.

If you are filing a simple return like a 1040EZ, you can pull out the form and start filling it out at this point. Low to moderate income earners (generally below $50,000) can get free tax return preparation assistance. I worked as a VITA volunteer in law school, and prepared many 1040EZs for low income families - it's a legitimate program that can help a lot.

If you are hiring someone to do your taxes for you, this is a good time to find out how much more work they'd like you to do. Our old accountant would send us a worksheet that I would fill out, but our current accountant prefers me to hand over the sorted papers.

If you are doing your own taxes and are filing a 1040 or 1040A, pull out the form and just go step by step through the instructions and a draft version of the form. You may need to rearrange some of the sorting you did previously, but everything should be quite easy to find now that they're in general categories.

You have 82 days from today until the filing deadline of April 17. Good luck!

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