Get Organized Early for Tax Time

Many people choose to do a bit of organizing immediately after the winter holidays. As the New Year approaches, the old saying “out with the old and in with the new” takes on a literal meaning. Why not take this organization to the next level and get started early on your 2010 taxes? You can approach tax season at a slow and steady pace, avoiding the stress that comes with filing at the last minute.

The first thing you’ll want to do is organize your paperwork. You may wish to use a spreadsheet or online tax tool to keep track of your documents, but keep in mind that you’ll need physical copies of important documents (especially if you are audited later). Although the best policy is to be conservative about what you keep, you won’t need to hold on to every single document. Start a filing system to arrange your documents by category and keep all tax-related items in a single location. If you itemize your deductions, you’ll want to hold on to all applicable receipts, but consider writing the amounts down in your spreadsheet and storing the physical receipts in your filing folders. Certain types of deductions are more difficult than others to account for. If you are deducting medical expenses or charitable contributions, you may wish to use your check register or bank statements to gather the required information.

Next, make sure that all employers who paid you at any point during the previous year have your correct contact information on file. It’s better to realize now that a former employer has the wrong address listed, rather than waiting until late February. And although it is a good idea to start preparing early, you will want to wait until February to actually file your taxes, since employers and banks may wait until the January 31st deadline to mail your tax documentation. In order to ensure that you have all the correct documentation to start your tax filing, you may wish to consult your return from 2009, starting with Form 1040. Go down the list, gathering your W-2s, 1099s, bank statements, and any other documentation you will need. A checklist, such as this one: from TurboTax may also help you determine what documentation you will need to gather.

Once you have all the necessary documentation prepared and organized, decide how you want to file your taxes. Do you want to use an electronic filing method and do them yourself, or do you want to hire a tax professional? Either way, the earlier you start, the better off you will be. You don’t want to wait until the height of tax season to consult an expert, as he or she will be extremely busy by that time. Your consultation will undoubtedly be more in-depth if you do it early. You should consider your options carefully before deciding on a method. If your tax return is extremely complex and detailed, you might be better off hiring a professional. Similarly, if you itemize your deductions, a tax expert, who will know how the new tax codes apply to you, may be able to find a few extra deductions that you would have missed. On the other hand, if you are confident that you can file your return successfully, an online service may be your best bet.

When you are ready to file your return, be sure to send it in a way that can be tracked. If you wait until the last minute and mail your return via standard mail, it may very well get lost in the rush, and you will have no way of proving that you mailed it on time. Sending your return via certified mail with a tracking number will ensure that you can prove when it was sent. You may also wish to consider filing electronically, which can also result in a quicker refund.

Two of the most common causes of errors associated with tax returns are 1) rushing to file before the deadline and 2) not having the correct documentation. By starting now, you can avoid both of these situations and breathe easy when April arrives.

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