This time of year can be very stressful to many people as it is crunch time for taxes. The IRS can be very intimidating at best, and when there a possibility you may be missing important documents, the IRS can become downright frightening.
Becoming organized is the best way to increase your odds of having a successful income tax time and increase you chances of a refund. Below are several ways to help you keep great tax records.
Save, Save, Save
If you itemize deductions, it is important to save all of your receipts for house payments, donations, and tax write-offs for work. If you get a write-off for mileage on your work vehicle, a helpful hint is to keep a small note book in your vehicle to write down the dates and all work related mileage. Keeping it in one notebook helps reduce paper clutter. At the first of the year, pull your old notebook to place with tax items, and replace with a new one.
A year’s worth of paper receipts can start get pretty big, so invest in file box to only keep tax items. Place tabs on individual file slots. Depending on your own situation, tabs could read Prior Tax Returns, Work Receipts, Donations, W-2′s, and Work Write-Offs. It is a good idea to label a slot Miscellaneous as well. This can be used to place any items that you may be unsure of you need for tax time. It is also a good idea to have photocopies of everyone in you household’s current social security cards as well as driver’s licenses, and birth certificates. These are not always needed by the tax preparer, but if for some reason they do need it, it will be right on hand. This can save you from having to make another appointment to come back.
Find out What is Needed for Taxes and What is Not
For example you could have a slot in your file labeled for Prior Tax Returns. It is only important to keep the last five years on hand. According to the IRS, if there is an audit, they only need the last five years of tax returns. Keeping returns older than five years only clutters your space. Shred those older than five years so no one can get hold of your important information.
In addition to your paper copies, it is a good idea to have back-ups of all your tax records. If you have a scanner, scan all your important documents onto your computer. This way you have a back-up of all your paper documents that can be accessed with a few simple clicks.
Prepare for Your Tax Appointment
After you have received all of your tax information, call and set up an appointment with your tax preparer. Ask them what is needed, and sort through your file box to ensure all necessary items are there to take to your appointment. You can leave any items in your miscellaneous tab to discuss at your appointment.
photo courtesy of 401K
If you follow these simple steps, tax time can become a lot less intimidating. In fact becoming organized may help you look forward to tax time.
Neil Davis is a tax consultant and in his spare time blogs for workingtaxcreditcalculator.co.uk a site which can help you stay up to date on tax credit changes 2012 as well as changes on working tax credits.