Tax
Time: Preparing to Prepare
Compiling
everything you need in order to prepare your federal income taxes
is often a bigger challenge than actually doing them. Though the
process of locating forms and documents may feel overwhelming,
it really just requires knowing what you need, and an organized
approach to hunting and gathering.
Obtain
the Right Tax Form
Make sure you get the right tax form for your individual situation.
Many people will use the same one they used for the previous year,
but if your circumstances have changed, you may need to use a
different form. The options for most employed individuals are
the 1040EZ, the 1040A, and the 1040. To know which is right for
you, read, “File the Right Tax Form” on BALANCE’s
website at www.balancepro.net, or visit the IRS website (where
you may also download the appropriate form) at www.irs.gov.
Gather
Personal Identification Information
Of course you will need to know your own Social Security Number,
but you may need to know a few others as well. These may include
those of your spouse, children, childcare provider, and anyone
to whom you pay alimony.
Gather
Income Information
Your next task is to collect all of your income information. Depending
on where you derived your income, you will need documents for:
- Earned
income (your W-2 form from your employer)
- Partnership,
S-Corporation, and trust income
- Pensions
and annuity income
- Unemployment
compensation
- Rental
income
- Social
Security benefits
- State
and local tax refunds
- Earnings
from the sale of your home or real estate
- Investment
income (interest and dividends, proceeds from broker transactions,
and retirement plan distributions)
-
Alimony received
- Jury
duty pay
- Gambling,
prizes, and lottery winnings
- Scholarships
and fellowships
Collect
Deduction Information
If you plan to itemize your deductions, make sure you account
for everything. Depending on what you are able to deduct, you’ll
need to have records for such outgoing expenditures as:
- Mortgage
interest
- Real
estate taxes
- Rent
- IRA
or other retirement plan contributions
- Miscellaneous
investment related expenses (such as safe deposit box fees if
used to store investment documents and computer depreciation
if used to track assets)
- Early
investment withdrawal penalties
- Medical/dental
bills
- Moving
costs
- Charitable
donations and volunteer expenses
- Auto
loans and leases for vehicles used for business
- Student
loan interest
- Alimony
- Unreimbursed
job-related expenses (travel, uniforms, union dues, education)
- Job-hunting
expenses
- Child
care expenses
- Adoption
expenses
- Tax
return preparation expenses
If
you have to scavenge for each necessary item, make a commitment
to keep good records from this point forward. It will make this
time next year a much less demanding experience. |