Sunday, February 24, 2013

5 Tips to Help Arrange Your Documents for Tax Season

Every year Americans have to file their taxes unless they don't earn enough income to qualify having taxes taken out.  There are tons of tools available to help prepare your taxes and determine if you will get a refund or owe money.  Some of the most widely used tools are Turbo Tax, Tax Cut and Quicken.   

One of the reasons many Americans end up owing taxes or miss out on claiming deduction is because their financial papers are not in order.  Many throw away, misplace receipts or even falsify documents because the original document cannot be found. 

Don't wait until the last minute, this year start early and gather all of your financial paperwork.  You can use an automated tool to track your spending and deductions or use a piece of paper, or word processing software such as Excel or Access.  Getting organized will help you to see right away what deduction you can qualify for. 

Using a tax preparation tool has all the tax laws imbedded in the tool which makes it easier for you to see what deductions you are eligible to claim.  Here are 5 tips to help arrange your documents for tax season.

1. Gather. Gather all receipts, monthly, quarterly and yearly statements, medical bills, student loans, credit card statements, prescriptions, financial statements, etc. and place in one easy to find location.

2. Automation. Use a software package like Quicken or Quick Books to record all of your deductions. Use basic column headings: Item, Date Purchased or Sold, Cost, Quantity, Total Cost.

3. Categorize. Identify all items that can be used as itemized deductions and put them in one folder. Determine if the standard deduction for your tax bracket is greater than your itemized deductions. (This can be found in the IRS tax manual by using the items identified in tip 2). If not (standard deduction is less than itemized deduction), use the worksheet included with your IRS tax booklet to calculate your itemized deductions.

4. Go Green. To save money file your taxes electronically. You will receive your refund in approximately two weeks from the date of filing and you help save the environment. 

5. Be Patient. Don't get a tax refund loan (rapid refund) or refund anticipation loan. You are charged a fee to get the refund loan which usually has high interest rates and associated fees. Save yourself time and money. 

No comments: