Tax preparation should be a year-round process. If you have not started thinking about your 2012 taxes, now could be a great time to start. With a few exceptions, the documents you will need to file your tax return stays the same each year as well. There may be occasions when certain changes in your life warrant additional or fewer documents, however, as a general rule, the basic tax documents needed will not change. Knowing what you will need and when you will need it allows taxpayers to prepare in advance. This eliminates the “end of year” scramble to gather all supporting documents needed to file your return. Here are some tips to get organized and prepare for your 2012 tax return before next year’s deadline.
If you are like most people, the minute last year’s tax return was filed, you felt an enormous weight lifted off your shoulders. When filers rush around trying to gather documents at the last minute, the last thing they want to do is immediately launch into next year’s preparation. Ironically that is exactly what you have to do to prevent the same situation 10 months from now. To avoid last minute rushing, begin planning 2012 tax return now and be sure to get your files organized to have a quick and easy place to put your important documents so you don’t have to go searching for them during tax season.
The benefit of starting right away is not only saving yourself from future hassle but being able to get organized while “tax season” is still fresh in your memory. Create an income tax checklist based on your 2011 return and use it to determine which documents you will need for next year.
For paper copies of documents you receive throughout the year, you can create and organize file folders. Using the income tax checklist you can easily see what files would be needed and how to organize your paperwork to ensure all of your documentation is ready at the end of the year. If you prefer a method of organization which requires less paperwork and more technology, you have several options from which to choose. There are spreadsheets, tracking software and even mobile apps which allow taxpayers to receive, track, organize and manage expenses daily, weekly, monthly and annually. The use of any of these types of technology will streamline your organization process and ensure all of your necessary information is available at the touch of a button.
One of the biggest sources of stress for taxpayers is finding ways to lower tax liabilities. If you owe money each year to the IRS, you are not paying in enough in taxes throughout the year. Find ways to lower your tax liability now, instead of waiting for the dreaded news that you owe money in next year. This may be achieved by increasing withholding tax, paying higher estimated taxes or remaining abreast of changes in tax laws. Are you claiming all deductions and tax credits for which you are eligible? Can you make any changes in how you are managing your donations, investments or retirement savings to reduce tax liabilities? There are several, legal ways in which filers reduce taxable income and tax liabilities. If you are not certain you are taking advantage of these methods, the time to investigate is now.
This post was published on July 6, 2012