With the end of 2007, it is time to begin thinking about and preparing for income tax preparation. January 31 marks the last day that employers have to get W-2 forms out to employees. Even if you are under 18, you need to and should file your income taxes. You will most likely get a refund of income tax. When you have assembled any and all W-2s from your employers, you can prepare your taxes immediately and if you will receive a refund this year, you can get it as early as possible. In this article, I will walk you through the steps to take to gather and organize the necessary information you’ll need to file your taxes.
Look for my upcoming articles on:
Free Filing Your Own Taxes Online
Advantages of E-filing and Direct Deposit
Evaluations of Tax Preparation Methods
How to Select a Filing Method
Cautions of Refund anticipated Loans
Ways to Avoid Having to Pay
Lock boxes and Safes
Advice to Teens on Tax Filing
Cash Advance Stores
What to Put and Not Put in Your Wallet
Papers you Need to Save
When to Itemize
Understanding Tax Jargon
Step one in preparing for tax time is to open a checking account if you don’t already have one. E-filing with direct deposit is the fastest way to get your refund back. Banks are offering some good incentives for opening checking accounts just now.
Next, purchase or make a filing system, using a drawer, filing cabinet or plastic organizer. Use this for storing receipts for purchases and paid bills, tuition, child care payment receipts, medical information, insurance and banking information. Do not store documents, social security cards, tax forms, wills, deeds, titles, certificates, CD, stocks or any other primary document or original. These should be kept in a safe, safety deposit box at your bank or fire proof lock back
After setting up a file system, you will need to attack that mountain of papers that you have saved but not sorted.
Sort receipts and statements according to merchant, source or provider. I recommend saving all receipts for one year.
Sort medical receipts by patient.
Place them in chronological order, beginning with those from January of 2007.
Attach receipts for each month to the corresponding statement. (e.g. attach receipts for all purchases made in March on your Visa card to the statement from VISA for March.)
For tax purposes, save and organize the following receipts:
Medical bills and statements, co-pays, insurance premiums paid (this will show on check stubs for employer benefit insurance), prescription receipts (including glasses, hardware, hearing aids, etc.). You will need to know what you paid for medical costs throughout the year.
Check stubs or direct deposit slips
Interest statements (you will receive these from your bank or financial institution; the documents are called ‘NT statements.)
Unemployment compensation or disability payment receipts (these are taxed).
General assistance, BRIDGE cards or food stamps, Medicaid (these are not taxed, but if you owe anything for overpayment, this will come out of your refund.)
Bank or debit card statements
Property tax bills (this should come to you as a statement from your city)
Mortgage or rent receipts. Renters you may qualify for property tax credit because part of your rent goes for city taxes.
Heating bills (gas, electric, propane bills depending upon how your home is heated.)
Retirement, 401K, Roth IRA statements.
Escrow account statement.
Gambling or gaming winning statements (even online gaming).
Work-related purchase receipts for which you are not fully reimbursed especially teachers (classroom supplies, books, etc.)
Mileage receipts for work-related travel
Tuition receipts (private or parochial schools, college, trade school, online classes, specialty schools like Olympia or Ross)
Day care payment receipts
Care for elderly receipts that you pay (nursing home, assisted living, etc.)
Social Security numbers for all children and dependents
Charitable contribution receipts
Copies of receipts you give to people for services you perform or items you sell.
Earnings from CDs, mutual funds, security and stocks. Some are tax sheltered or tax deferred; others are not. Your banker or broker will advise you.
Don’t be caught unprepared; get the jump on your taxes.