Preparing for Taxes
The IRS outlines several consequences for late filing. They include: Interest and penalties; Loss of social security benefits for the self-employed; and Trouble getting loan approval for home, car, education. One of the main reasons people have for late filing is that they don’t have all of their documents organized or are dealing with receipts for items they are planning to itemize for deductions. Do yourself a favor and be sure that itemizing is right for you before you decide to file late. Often times, taking the standard deduction ends up being the best option, even more so when late fees, penalties, and hours of stress and anxiety of filing late are involved. Here are two helpful resources to see which is your best option.
- IRS guide to “Should I Itemize?” http://www.irs.gov/Individuals/Parents/Should-I-itemize%3F
- Find out the amount of standard deduction you qualify for here http://www.irs.gov/publications/p501/ar02.html#en_US_2013_publink1000289305
Strategies for gathering your paperwork
Getting ready for tax season doesn’t have to be a headache. If the idea of filing makes you cringe, try this simple system for keeping track of important tax-related papers.
Create 2 hanging files, baskets, bins, envelopes, or cardboard boxes for the tax year you are working on.
- Use one to store support materials that will be necessary only in the case of an audit. These would include bank statements, monthly investment statements, mortgage statements, paycheck stubs, etc. As they come in the mail, simply pop them into the file and go about your day. At the end of the year, all your supporting documents will be in one handy place ready to be archived for your records.
- Use the other container to keep official IRS forms that you or your accountant will need to input data when you are filing. These would include W-2, 1099, 1098, charitable donation receipts, etc.