Timely Tax Tips

Ah, tax time. Just the mention of it is enough to inspire the most organized of us to wince.

It seems like every year around this time, we say to ourselves, ‘OK, so next year I’m going to get it together so I’m not going to be a crazy person come April 17th.’ Then you go back to scouring the house for receipts, deciphering new tax codes, and wishing your spouse was an accountant. Since there’s no way to go back in time and get a system in place to make the tax process easier, we’ve come up with some helpful hints to streamline and de-stress this year’s task, while establishing a routine that will make next year’s tax time even less stressful.

#1. Review Last Year’s Return
The best way to start in on this year’s taxes is to get out last year’s return to review it. Look and see what deductions you made, what changes you made in your life that may affect this year’s return, and note if there are any carry-over losses you might have forgotten about.

#2. Visit IRS Online
Even the Internal Revenue Service knows how complicated the tax process can get. By visiting the IRS website at irs.gov, you can get clarification on all of your tax questions, learn what tax laws have changed, and, most importantly, see what does and doesn’t qualify as a deduction. (Sorry, as much as they seem like it, cats are not dependants.)

#3. File Return Electronically.
In 2006, more than 70 million people filed their tax returns electronically. Not only is it faster and easier to fill out, it’s more accurate as well. Plus, if you qualify for a refund, the waiting time for e-filers is half that of paper filers.

#4. Can’t Pay? Don’t Panic.
A huge source of tax-time stress comes from the realization that you may not be able to pay what you owe come April. Don’t worry. There are options. You can apply for an IRS installment agreement, which lets you break up your payments. There are also various options for charging your balance to a credit card. Visit irs.gov for more information.

#5. Made a Mistake? It’s OK.
Did you already send in your return, only to discover that you forgot a deduction, or made a few errors on it? Instead of turning yourself in to the proper authorities, simply fill out a 1040x form, which lets you amend your original return up until three years after the original filing date.

#6. Make Process A Family Affair
Everyone is involved in taxes, so everyone should be involved in putting them together. Couples should sit down and divide tasks between them, while families with children can get them involved so everyone has an understanding of what it takes to run a household.

#7. Give Everything a Home
Buy 15 file folders and label them for each of the critical tax categories:

  • Bank Statements
  • House Bills (mortgage, property tax)
  • Investments
  • Medical/Insurance
  • Charitable Donations
  • Last Year’s Return
  • Work Expenses
  • Credit Card Statements
  • Other Income
  • Other Expenses
  • Other Deductions
  • Work Compensation
  • Retirement
  • Dependents

The final folder should be called YUNKâ„¢. YUNKâ„¢ stands for ‘You Never Know’ and is for everything that you think might be useful but are not sure about. File it here now and ask your tax specialist about it later. Use these folders to organize your receipts and statements that you have collected over the past year. That way you will know where to look when you’re itemizing deductions.

#8. Annotate Tax Related Items with a Star

Before you put something in one of your files, get out a pen and put a star next to items that have tax implications. If you don’t have a tax-related item on your statements — throw them out!

#9. Double Check Everything
It may sound obvious, but by double-checking your return, from deductions, to social security numbers, to signatures, you’ll save yourself lots of time and trouble later.

#10. Learn For Next Year
OK, one more year of taxes is done, and now it’s time to relax. But before you kick up your legs, remember what you wished you’d done better, and start creating a routine that can help you next year. Use the 15 folder filing system year-round to keep track of everything from bank statements to investments to donations.