Get ready for tax season - 47 ABC - Delmarva's Choice

Get ready for tax season

Updated: Jan 14, 2014 10:05 AM
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By Andrew Housser

April 15 might seem a long way off, but tax time has a way of sneaking up on people. Do not wait until the last minute to get your financial documents in order. In fact, you can file 2013 tax returns as early as Jan. 31. Consider filing early especially if you think Uncle Sam owes you money -- you will receive your refund all the quicker and be able to use it for your financial goals, such as eliminating debt. Regardless of when you plan to file, it is wise to begin preparing now. Here is a look at seven ways to organize your tax paperwork to stay within Internal Revenue Service (IRS) guidelines.

1. Determine what you have earned and what you have paid. You should receive a Form W-2 from your employer by the end of January. This form provides a summary of how much you earned in 2013, how much was taxable and the amount of taxes withheld. Independent contractors receive Form 1099-MISC. Self-employed workers must track their own revenue and quarterly tax payments. Everyone needs to keep good records of all business-related expenses.

2. Get your numbers in order.
The IRS requires a Social Security number for every family member who is claimed on your tax forms. If you claim elderly parents as dependents, you also will need their numbers. Also, be sure to get the tax identification number of the person or business that provides care to your children. You will need this to file for the child care credit.

3. Use home ownership to your advantage. The interest you pay on your home mortgage is tax-deductible, as is any escrow amount used to pay annual real estate taxes. Your mortgage lender should send you a form with this information. If you purchased a home and paid "points," or prepaid interest, to lower your rate, those points may be deductible. For 2013, private mortgage insurance (PMI) premiums may be deductible, depending on your income.

4. Keep tabs on personal property taxes. Some states or counties charge a personal property tax on items such as automobiles, recreational vehicles and boats, which then can be deducted on federal tax returns.

5. Collect your charitable receipts. Donations of less than $250 (in cash or goods) do not require a formal receipt. However, keep some documentation in case the IRS has questions later. For cash contributions, keep a receipt or canceled check. For noncash contributions such as clothing and household goods, maintain a record of the name and location of the charity, the date you donated items, a description of the donated property and an estimated fair market value of the donations. Volunteers can deduct 14 cents per mile for transportation costs to get to and from a nonprofit organization.

6. Review last year's medical expenses. Medical expenses that exceeded 10 percent of your adjusted gross income in 2013 are tax-deductible. This covers medical expenses for everyone listed on your tax return. Now is the time to find your receipts for often-overlooked deductions, such as uninsured medical expenses (orthodontics, eyeglasses and hearing aids), travel expenses for medical treatments, alcohol or drug abuse rehabilitation programs, weight loss or smoking cessation programs and laser vision corrective surgery. Depending on the individual, some long-term care insurance premiums may be deductible as well.

7. Pick a preparation method. If your taxes are fairly straightforward, you can save money by completing and filing the forms yourself. Tax software programs such as TurboTax and TaxAct guide you through the process. Consider filing your return online to receive your refund faster. For more complicated tax preparation, you can try a company that offers tax preparation services, hire a certified public accountant (CPA) who specializes in taxes, or hire an accredited tax accountant or tax preparer. To find a tax professional in your area, visit the Accreditation Council for Accountancy and Taxation or the American Institute of CPAs.

Doing this legwork now can speed up your tax filing process and alleviate some of the headache and frustration often associated with tax season. In the future, try to keep all of the above-mentioned materials stored in one place. It will make the following year's tax preparation go even more smoothly.

 

Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.

April 15 might seem a long way off, but tax time has a way of sneaking up on people. Do not wait until the last minute to get your financial documents in order. In fact, you can file 2013 tax returns as early as Jan. 31. Consider filing early especially if you think Uncle Sam owes you money -- you will receive your refund all the quicker and be able to use it for your financial goals, such as eliminating debt. Regardless of when you plan to file, it is wise to begin preparing now. Here is a look at seven ways to organize your tax paperwork to stay within Internal Revenue Service (IRS) guidelines.

 

1.      Determine what you have earned and what you have paid. You should receive a Form W-2 from your employer by the end of January. This form provides a summary of how much you earned in 2013, how much was taxable and the amount of taxes withheld. Independent contractors receive Form 1099-MISC. Self-employed workers must track their own revenue and quarterly tax payments. Everyone needs to keep good records of all business-related expenses.

2.      Get your numbers in order. The IRS requires a Social Security number for every family member who is claimed on your tax forms. If you claim elderly parents as dependents, you also will need their numbers. Also, be sure to get the tax identification number of the person or business that provides care to your children. You will need this to file for the child care credit.

3.      Use home ownership to your advantage. The interest you pay on your home mortgage is tax-deductible, as is any escrow amount used to pay annual real estate taxes. Your mortgage lender should send you a form with this information. If you purchased a home and paid "points," or prepaid interest, to lower your rate, those points may be deductible. For 2013, private mortgage insurance (PMI) premiums may be deductible, depending on your income.

4.      Keep tabs on personal property taxes. Some states or counties charge a personal property tax on items such as automobiles, recreational vehicles and boats, which then can be deducted on federal tax returns.

5.      Collect your charitable receipts. Donations of less than $250 (in cash or goods) do not require a formal receipt. However, keep some documentation in case the IRS has questions later. For cash contributions, keep a receipt or canceled check. For noncash contributions such as clothing and household goods, maintain a record of the name and location of the charity, the date you donated items, a description of the donated property and an estimated fair market value of the donations. Volunteers can deduct 14 cents per mile for transportation costs to get to and from a nonprofit organization.

6.      Review last year's medical expenses. Medical expenses that exceeded 10 percent of your adjusted gross income in 2013 are tax-deductible. This covers medical expenses for everyone listed on your tax return. Now is the time to find your receipts for often-overlooked deductions, such as uninsured medical expenses (orthodontics, eyeglasses and hearing aids), travel expenses for medical treatments, alcohol or drug abuse rehabilitation programs, weight loss or smoking cessation programs and laser vision corrective surgery. Depending on the individual, some long-term care insurance premiums may be deductible as well.

7.      Pick a preparation method. If your taxes are fairly straightforward, you can save money by completing and filing the forms yourself. Tax software programs such as TurboTax and TaxAct guide you through the process. Consider filing your return online to receive your refund faster. For more complicated tax preparation, you can try a company that offers tax preparation services, hire a certified public accountant (CPA) who specializes in taxes, or hire an accredited tax accountant or tax preparer. To find a tax professional in your area, visit the Accreditation Council for Accountancy and Taxation or the American Institute of CPAs. 

 

Doing this legwork now can speed up your tax filing process and alleviate some of the headache and frustration often associated with tax season. In the future, try to keep all of the above-mentioned materials stored in one place. It will make the following year's tax preparation go even more smoothly.

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