Now that we are a full week into 2012, it is time to start thinking about the dreaded tax season. Taxes don’t have to be difficult. For most of us, they can be a quick and painless process.
Gather Your Tax Forms
This is both the hard and easy part of taxes for me. Most of what I need just shows up in the mail, but I have to be patient and diligent to get everything I need.
Your employer will supply you with a W-2, which is the most important input on an annual tax filing for most people.
Your banks and brokerages will send you 1099 forms for interest and investment income.
Companies that paid you money, such as freelancers and online advertisers, may be required to submit a 1099-MISC or related form.
Schools and student loan servicers provide you with forms for deductions on education expenses. Schools give you a 1098-T and student loan providers give you a 1098-E.
If you have a mortgage, you will get a 1098 to list your mortgage interest deduction.
If you itemize your deductions, gather receipts from donations to eligible charities so you can list those as deductions. You can add those up to be input on one line on your form 1040.
Compile Everything by Category
As my files come together, I throw them in a big manila envelope by my file cabinet, but as it gets thicker, I know it is time to sort.
I organize my forms by income type. I create a bundle with my work income (W-2 forms). I then create a bundle with my banking and investment income and another bundle for 1099s for freelance and online income.
Behind that, I put my deduction information into bundles by category for education, home, and donations.
If you own a small business that has pass through income to your 1040, you have to create a unique income statement for each business with supporting documentation. I put those in separate folders with the income statements on top for easy reference.
Get the Files to Your Accountant, or Do It Yourself
Now that everything is easy to sort through, I fill out a form for my accountant. This summary allows the accountant to quickly move simple totals to my 1040 (saves him time and me money) so he can focus on the more complex parts of my filing.
If you have a simple and easy financial setup with only one job and few deductions, you can easily use an online program to save money. Just make sure that you are very thorough and accurate if you do it yourself.
Submit and Move On
After all those hours of compiling, adding, filing, and filling out your forms, it is time to submit. Double check your return to make sure there are no surprises. If all goes well, you will be able to file online and get a refund directly deposited to your account.
If you are trying to figure out where to get started, take a look at TurboTax. I have used it in the past and it is simple, easy to use, and allows for quick filing online.
Questions
If you have any questions about organizing your taxes, let me know in the comments. I will make sure to answer everyone.
Image by MoneyBlogNewz.
Eric
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