It is hard to believe that another tax season is rapidly approaching. With the holidays around the corner, no sooner will you be finishing your Thanksgiving turkey than you will be sitting in your accountant’s office or loading tax software onto your PC to assist with filing your return. The following are several ideas to help simplify the tax preparation process.
Tax Preparation Service
The first step in preparing your taxes is gathering the data and forms you’ll need to complete the return. A good place to start is to look at your tax returns for the last three years and make a list of items that were reported. For example you should expect to receive a W2 form from each of the employer(s) you worked for in 2008. Create a folder marked Taxes 2008 and place the forms in it as you receive them. Use this folder to collect any other information or data that you’ll need for filing. Examples include information about mortgage interest, real estate taxes, interest earned and dividends, stock information, IRA contributions, charitable donations, k1 schedules, college tuition, alimony, unemployment, 1099s, social security received, medical expenses paid, etc. The point is to start getting organized early so that when the time comes to file your taxes, you have all the information you’ll need in one place.
Related, is the need for appropriate documentation. Proper documentation is needed for anything that is placed on your tax return, and you should be aware of documentation requirements. For example, charitable donations over $250 you must have a receipt in order to report the deduction. Another example is in reporting any investment activity. Any sale through the stock exchange needs to be reported on your tax return. If you lost money in the sale you can deduct up to $3,000 per year with additional losses carried forward to the following years. When reporting any stock activity, make sure you have a break down of what was paid for the stock originally and what the stock was sold for. For example if you purchased xyz stock on May 1st of 2008 for $100 and sold the stock on June 1st of 2008 for $50, you have a loss of $50 which is deductable.
For taxpayers who are self-employed, start preparing your profit and loss statements now. The sooner the profit and loss statements are done, the sooner your tax preparer can begin working on the return, which could enable you to file an earlier tax return. In the event that money is owed, this gives you more time to make arrangements for generating the funds needed to pay the debt.
