Do you dread tax season each year? If so, getting a jump on your tax preparation now can help you avoid the stress of trying to make the filing deadline. Here are three tips to help you prepare for filing your taxes next year.
1) Organize Your Previous Year's Tax Records
The easiest way to get started on next year's tax return is to organize all of your previous year's tax information. If you use a tax preparation program, print a copy of your return from last year. Place it in a file, along with all of your tax receipts and documentation for your income and deductions. Be sure to write the tax year on the folder, so that you don't confuse it with the information you need going forward.
As you receive the tax documents for the current year, start a new folder for that year's information. Check your previous year's folder to get an idea of which documents you'll need.
2) Include All of Your Income
An important part of preparing your taxes is assembling all of your income. According to the IRS, you'll need to report all of your income, including wages, self-employment earnings, interest income and investment income. In addition, if you receive gambling winnings, alimony and Social Security benefits, these may also be subject to federal income taxes.
Refunds from state and local income tax departments, income from rental properties and scholarships may also be taxable. Since the IRS occasionally conducts audits and asks for documentation, be sure to keep your receipts and income statements such as W-2 forms, 1099 forms and self-employment earning reports.
3) Keep Track of Your Expenses
Along with your income, you'll need to collect all of your information relating to expenses and deductions. Some of the most common tax expenses include contributions to IRA plans, educator expenses and costs you pay for self-employed health insurance premiums. Other tax deductions include moving expenses, medical costs and unreimbursed employee expenses.
While some of these items are used as tax deductions, others are taken as adjustments to income or as tax credits. Since these are all accounted for differently, you'll need to keep your receipts and consult a tax professional on how to claim them correctly.
If you're looking to avoid the last minute hassle of tax time next year, now is the time to start preparing for next year's return. When you organize your previous records, add up all of your income, and track all of your expenses, you'll be ready for next tax season!