As tax time approaches, it's common to start to look for tips for making filing your income tax return easier. Though many receive a refund after filing income taxes, actually filing the tax papers can be somewhat of a chore. If you're not organized, it becomes even more troublesome. Consider the steps you can take in order to make your taxes easier.
Depending on the type of income you received throughout the year, you may receive W-2 forms or 1099 forms to show how much you earned. You need these to file your taxes. Companies must send these out by the end of January, but there could be a delay if it gets sent to the wrong address.
At the end of the year, double check with your company and other institutions like banks to ensure they have your proper address. This is especially true if you moved this year.
When your taxes are fairly straightforward -- you only have income from an employer and will take the standard deduction -- it's relatively easy to prepare the return yourself. However, a software program can make things even easier.
No matter which commercial program you choose, make sure that it's for the current year, as it will have the most updated tax codes. The program should walk you through a series of questions about your financial situation to see if you qualify for credits or special deductions. If you try to file on your own by paper, you may miss out on these.
Those who have more complex tax situations, such as business owners or those who frequently trade stocks, would have the easiest time paying someone to prepare their taxes for them. The tax preparer will determine what you need to file beyond a W-2 or 1099 form, including receipts and accounts of unreported income and ask you to bring those to the meeting.
From there, he'll do the work for you, noting areas where you may be able to take extra deductions from your income.
It's smart to keep all of the documents you'll need to file your taxes in one location so that when it's time to actually sit down and do the work, you won't waste time looking for that necessary document.
For example, you should have a copy of your last year's tax return, any W-2s or 1099s you've received, financial statements from tax-deferred accounts, receipts that relate to your business or other documents that justify a deduction.
At the end of the year, assess your situation for filing. For example, you may need to use up some of the money in a flexible spending account before it expires. It's also a smart time to make contributions to your tax deferred accounts if you can afford it, as these will decrease the amount of taxable income you have. Some, though, can wait -- 401k contributions must be made by the end of December, but payments to an IRA made early in the year can count toward the previous year's tax return.